Nordson (NDSN): Buying the Dip Amid Sector Shifts and Margin Resilience

Investors seeking to capitalize on a repositioning industrial leader with strong margin discipline and strategic catalysts should take note of Nordson Corporation (NDSN). Despite sector headwinds, Nordson's recent earnings beat, margin resilience, and the outperformance of its Atrion acquisition position it as a compelling buy at its current forward P/E of 20.1×, well below the sector average of 23.5×. Let's dissect why the dip is worth buying now.

Earnings Beat Highlights Margin Strength and Strategic Momentum

Nordson's Q1 2025 results underscored its ability to deliver on guidance amid macro challenges. Revenue rose 5% year-over-year to $682.9 million, topping estimates by $7.2 million, while adjusted EPS of $2.42 beat expectations by $0.06. Even as operating margins dipped slightly to 24.7%—due to cost inflation—the adjusted EBITDA margin held steady at 31.8%, a testament to operational discipline.

The Atrion Acquisition: A Growth Engine Ahead of Expectations

The $380 million acquisition of Atrion Corporation, completed in late 2024, has already delivered outsized contributions. In Q2, Atrion added $51 million in revenue, driving an 8% boost to total sales and fueling a 20% surge in the Medical and Fluid Solutions segment's sales. This segment's EBITDA jumped 22% to $77 million, with margins expanding to 38% of sales—a clear win for Nordson's strategy to shift toward high-margin medical and semiconductor markets.

The acquisition's benefits extend beyond revenue: it deepened Nordson's footprint in medical infusion systems and cardiovascular technologies, areas with strong demand and limited competition. While the integration added $7 million in interest expense due to higher debt, the leverage ratio remains 2.4x, comfortably within targets.

ATS Segment: Semiconductor Tailwinds and Backlog Growth

The Advanced Technology Solutions (ATS) segment, despite a 11% sales decline, maintained $18 million in operating profits thanks to cost reductions and manufacturing optimization. The segment's EBITDA stayed flat at 19% of sales, even as semiconductor-driven demand for electronics dispense and optical sensors began to accelerate.

The ATS backlog swelled by $85 million in Q1, signaling a turnaround. With over 50% of ATS revenue tied to semiconductors and high-performance computing, this segment is primed to benefit from the global chip shortage recovery and AI-driven demand. Management's third-quarter guidance—projecting sales of $710–$750 million and EPS of $2.55–$2.75—reflects confidence in ATS's rebound.

Restructuring Savings: A Buffer Against Softness

While the Industrial Precision Solutions segment faced a 10% organic sales decline, Nordson's restructuring efforts—such as consolidating manufacturing and rationalizing low-margin contracts—have insulated margins. The $85 million share buyback in Q1 and $44 million in dividends further underscore financial flexibility, even as the company invests in integration.

Risks and Why They're Overcome

• Industrial Softness: Weakness in coatings and polymer processing remains a drag, but these segments now account for a smaller portion of revenue as Nordson pivots toward medical and semiconductor.
• Trade Uncertainties: Currency headwinds and geopolitical risks persist, but Nordson's 50% exposure to North America and strong backlog mitigate geographic dependency.

Valuation: A Mispriced Growth Story

At a forward P/E of 20.1×, Nordson trades at a discount to its 5-year average of 21.8× and the industrial sector's 23.5× multiple. With $9.67 in 2025 EPS expected (up 7.5% year-over-year), the stock offers a 12-month upside of 16% to $230.

Conclusion: Buy the Dip, Position for Growth

Nordson's margin resilience, Atrion's outperformance, and semiconductor-driven ATS recovery make it a standout play in an uneven industrial sector. With a manageable debt load, robust backlog, and valuation below its growth trajectory, now is the time to buy the dip. Risks are mitigated by strategic shifts, and the forward P/E offers a margin of safety as macro tailwinds materialize.

Investors who act now may capture a $200+ stock climbing to $250+ in 12 months—a 25%+ return—as Nordson capitalizes on its repositioning as a leader in high-margin tech and healthcare markets.

This analysis is for informational purposes only and not a recommendation to buy or sell securities.