Nordson's Steps To Diversify Despite Volatility, Margin Boost Initiatives Win Analyst Attention Who Prefers Buying The Dips

KeyBanc analyst Jeffrey Hammond upgraded Nordson Corp NDSN from Sector Weight to Overweight and a $255 price target.
Nordson reported Q1 sales of $610 million versus analyst estimates of $623.88 million. The company turned in adjusted EPS of $1.95 compared to consensus estimates of $1.98.
The analyst has been a contrarian on the Electronics business, believing in buying dips around electronics weakness while avoiding the name when electronics sentiment is too high.
Despite volatility, Hammond thought management had taken numerous steps to diversify the portfolio and mitigate risk around the semi and electronics cycle. The actions included expanding its more stable growth Medical business, broadening its less cyclical Test & Inspection business, and reducing its consumer electronics exposure.
The divestiture of an unprofitable non-core business, a greater focus on profitable growth, and operational acumen boosted operating margins by ~+500 bps under Sundaram Nagarajan's leadership. They are now above the company's long-term targets.
A more constructive approach to 80/20 will likely benefit the company's top- and bottom-line performance over the long term.
Hammond expects management to continue to look at value-creating deals in the Medical and Test & Inspection space while also considering buybacks, particularly on this recent pullback.
While still trading at a premium, the analyst feels the current valuation provides a more attractive entry point vs. current levels.
Price Action: NDSN shares traded higher by 4.99% at $222.49 on the last check Wednesday.

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