Manufacturing company Nordson (NASDAQ: NDSN) missed Wall Street’s revenue expectations in Q1 CY2025 as sales rose 5% year on year to $682.9 million. Its non-GAAP EPS of $2.42 per share was 2.6% above analysts’ consensus estimates.

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StockStory’s Take

Nordson’s first quarter results reflected a mix of acquisition-driven growth and ongoing challenges in select legacy segments. CEO Sundaram Nagarajan highlighted that momentum in Advanced Technology Systems, particularly from semiconductor and electronics customers, and the solid performance of the recently acquired Atrion business helped offset organic revenue declines elsewhere. Management also pointed to continued softness in industrial system sales, especially within industrial coatings and polymer processing, citing weaker end-market demand compared to last year. The company’s operational focus and cost discipline supported margin expansion, with Nagarajan noting that the integration of Atrion was exceeding expectations and contributing positively to both sales and profitability.

Looking ahead, Nordson’s guidance for the next quarter is underpinned by sustained demand in electronics and semiconductor markets, an improving outlook for medical fluid components, and incremental benefits from restructuring actions. Nagarajan emphasized, “We are seeing positive order entry momentum in electronics, precision agriculture, and select medical product lines,” suggesting this will drive sequential improvement. Management expects the effects of destocking in medical interventional products to continue fading, while recent divestitures are anticipated to sharpen the company’s focus on higher-margin offerings. However, CFO Daniel Hopgood cautioned that ongoing trade policy uncertainties and automotive market headwinds could still impact customer investment decisions, indicating the outlook remains sensitive to external factors.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to strong contributions from recent acquisitions and targeted restructuring, even as some core segments continued to face demand headwinds.

• Atrion acquisition outperformance: The Atrion medical components business delivered higher-than-anticipated sales and margin contribution, with CEO Nagarajan noting “customer adoption of Atrion’s differentiated products” and successful operational integration exceeding initial projections.
• Advanced Technology momentum: Demand in the Advanced Technology Systems (ATS) segment was fueled by investments in next-generation computing, AI, and cloud infrastructure, with over half of ATS revenue now tied to semiconductor and high-performance computing. Management credited strong order entry, particularly from Asian customers, as a key driver.
• Industrial segment softness persists: The Industrial Precision Solutions (IPS) business saw continued weakness, mostly in industrial coatings and polymer processing tied to automotive end markets. However, the precision agriculture (ARAG) and nonwovens systems lines posted double-digit growth, partially offsetting declines.
• Medical segment portfolio reshaping: The announced divestiture of select medical contract manufacturing product lines is expected to increase the medical segment’s focus on proprietary components, improve margin profile by an estimated 100 basis points, and free resources for core growth areas.
• Operational cost actions: Targeted restructuring across underperforming businesses and the completion of major facility transitions are anticipated to yield over $50 million in annual savings by 2026, supporting margin resilience despite mixed demand.

Drivers of Future Performance

Management’s outlook centers on continued demand in electronics and medical components, as well as incremental margin benefits from portfolio optimization and restructuring.

• Electronics and semiconductor growth: Ongoing investment in semiconductor manufacturing, AI-related computing, and cloud infrastructure is expected to sustain strong order trends in the ATS segment. Management sees Asian markets as the primary near-term growth engine, with North American opportunities still to come.
• Medical segment recovery and focus: The medical segment’s organic growth is expected to recover as destocking abates and the segment pivots toward higher-value, proprietary components following the contract manufacturing divestiture. Atrion’s product pipeline and integration are anticipated to further boost segment performance.
• Restructuring and external risks: Cost structure improvements from recent restructuring and facility consolidation are projected to protect margins. However, management remains watchful of macroeconomic uncertainty, including trade policy changes and persistent automotive sector weakness, which could affect customer investments and order timing.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be closely monitoring (1) the trajectory of order entry in Advanced Technology Systems—especially semiconductor and electronics demand, (2) the pace of recovery in medical components as destocking trends unwind, and (3) the impact of portfolio reshaping on segment margins and overall profitability. Execution on restructuring savings and resilience to external market shifts will also be key to tracking Nordson’s progress.

Nordson currently trades at a forward P/E ratio of 20.1×. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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