NDSN Q3 Deep Dive: Margin Expansion Offsets Flat Sales, Cautious Outlook for Year-End

Manufacturing company Nordson fell short of the markets revenue expectations in Q3 CY2025, with sales flat year on year at $751.8 million. Next quarter’s revenue guidance of $650 million underwhelmed, coming in 0.9% below analysts’ estimates. Its non-GAAP profit of $3.03 per share was 3.4% above analysts’ consensus estimates.

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Nordson (NDSN) Q3 CY2025 Highlights:

• Revenue: $751.8 million vs analyst estimates of $761.8 million (flat year on year, 1.3% miss)
• Adjusted EPS: $3.03 vs analyst estimates of $2.93 (3.4% beat)
• Adjusted EBITDA: $255.8 million vs analyst estimates of $246.7 million (34% margin, 3.7% beat)
• Revenue Guidance for Q4 CY2025 is $650 million at the midpoint, below analyst estimates of $656 million
• Adjusted EPS guidance for the upcoming financial year 2026 is $11.15 at the midpoint, beating analyst estimates by 0.6%
• Operating Margin: 28.5%, up from 24% in the same quarter last year
• Organic Revenue fell 1.1% year on year vs analyst estimates of flat growth (101.5 basis point miss)
• Market Capitalization: $13.17 billion

StockStory’s Take

Nordson’s third quarter saw flat sales compared to the previous year, as the company navigated persistent softness in selected industrial and advanced technology product lines. Management highlighted that strong operational execution, portfolio optimization—including the divestiture of its medical contract manufacturing business—and successful restructuring efforts helped drive a notable expansion in adjusted operating margin. CEO Sundaram Nagarajan credited broad-based demand in medical products and stable aftermarket parts for offsetting declines in polymer processing and x-ray systems. Nagarajan noted, “We achieved record EBITDA of $256 million, expanding margin to 34% in the quarter.”

Looking forward, Nordson’s guidance reflects both optimism in key end markets and caution regarding macroeconomic uncertainty and portfolio shifts. Management expects a return to more typical growth in industrial precision and medical segments, supported by a healthy backlog and normalization in demand. At the same time, CEO Nagarajan acknowledged that risks remain, stating, “We think it’s still important to make sure that we’re...prepared for any potential outcome in the marketplace.” The company’s outlook is further shaped by ongoing investments in new product development and a continued focus on working capital improvements, as CFO Dan Hopgood explained that operational discipline will be essential for sustaining profitability.

Key Insights from Management’s Remarks

Management attributed the stable quarter to operational discipline, portfolio realignment, and the successful integration of recent acquisitions. Segment-level performance varied, with medical outperformance balancing industrial and technology softness.

• Medical segment recovery: The medical and fluid solutions segment returned to growth after a period of customer destocking, with broad-based demand across product lines. The integration of the Atrion Medical acquisition contributed to both sales and margin gains, and the divestiture of the contract manufacturing business further improved profitability.

• Industrial softness masked by aftermarket: While polymer processing and certain industrial coating systems remained weak, management noted stabilization in order rates and backlog. Precision agriculture and packaging product lines continued to deliver growth, and stable demand for aftermarket parts supported overall revenue and margins.

• Advanced technology volatility: The advanced technology solutions segment continued to be influenced by lumpy demand, particularly in x-ray inspection systems. Semiconductor applications—especially those tied to artificial intelligence (AI) and cloud computing—remained a source of strength and now represent about half of segment revenue.

• Portfolio optimization: The successful divestiture of the medical contract manufacturing business and the integration of Atrion Medical were highlighted as key portfolio actions. These steps improved the company’s focus on differentiated products and enhanced segment-level margins.

• Operational improvements: Management credited restructuring initiatives and targeted working capital improvements for record free cash flow conversion rates. These operational gains allowed Nordson to return cash to shareholders through dividends and share repurchases while reducing leverage.

Drivers of Future Performance

Management’s outlook emphasizes stable demand in medical, incremental recovery in industrial, and a focus on new product development, while remaining cautious about potential macro volatility.

• End-market stabilization: Management expects low single-digit growth in industrial precision as polymer processing and automotive end markets have stabilized, with precision agriculture in Europe and South America providing additional support. The medical segment is forecasted to achieve mid-single-digit organic growth, benefiting from demographic trends and a robust project pipeline.

• Semiconductor and technology demand: The company anticipates continued momentum in advanced technology solutions, especially in semiconductor-related products for AI and cloud computing. However, management noted that timing of orders remains unpredictable, and growth in x-ray systems may lag due to shifting inspection technologies and automotive exposure.

• Portfolio discipline and operational execution: Nordson plans to maintain a balanced capital allocation strategy, targeting both acquisitions of differentiated businesses and ongoing shareholder returns. Operational improvements, such as working capital initiatives and margin discipline, are expected to underpin profitability even if revenue growth is modest.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will track (1) the pace of recovery in polymer processing and automotive-related business lines, (2) sustained growth in medical and semiconductor-driven advanced technology segments, and (3) the impact of new product launches and technology transitions in x-ray inspection. Execution on working capital improvements and margin discipline will also be key for measuring strategic progress.

Nordson currently trades at $233.71, down from $236.32 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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