Nordson

Nordson's fiscal third-quarter adjusted EPS of $3.25 beat the FactSet consensus estimate by $0.16, sending shares up by roughly 7%. Organic sales increased by 12% from the prior-year period, with broad-based growth across all segments.

Why it matters: Management raised its outlook for the third time this year and now anticipates full-year adjusted EPS of $11.80 to $12.00, up from $11.30 to $11.80 previously. The guidance increase reflects strong results in advanced technology solutions as well as medical and fluid solutions. The earnings beat was driven primarily by a stellar quarter in advanced technology solutions, which grew its fiscal third-quarter organic sales by 31% from the prior-year period, fueled by robust demand in electronics dispense, as well as test and inspection. Medical and fluid solutions organic sales increased by 11%, while industrial precision solutions were up 3% year over year.

The bottom line: We've raised our fair value estimate for wide-moat-rated Nordson to $282 per share from $260, driven by our more optimistic revenue growth expectations for the advanced technology solutions segment and the time value of money. Nordson grew its backlog by 35% from the prior-year period, giving us confidence that the company can maintain its strong momentum. The faster-growing electronics and medical end markets now account for 52% of Nordson's revenue, up from 29% in fiscal 2014. The company ended the quarter with a net leverage ratio of only 1.7 times adjusted EBITDA, which gives management significant flexibility to deploy capital into acquisitions.

We've raised our fair value estimate for Nordson to $282 from $260 per share after the company reported third-quarter fiscal 2026 results, driven by our more optimistic revenue growth expectations for the advanced technology solutions segment and the time value of money.

Over our five-year explicit forecast term, we project average annual organic sales growth in the low to mid-single digits in industrial precision solutions and the mid- to high single digits in advanced technology solutions and medical and fluid solutions, resulting in an organic revenue compound annual growth rate for the firm of approximately 6% through fiscal 2030. We believe the company will benefit from favorable long-term secular trends in the electronics and medical end markets. Additionally, we expect the company to continue pursuing M&A to expand its portfolio of solutions and enter adjacent markets, and our model incorporates meaningful acquisitions. Factoring in acquisitions, we are modeling a roughly 8% average annual inorganic growth rate through fiscal 2030. Our base-case scenario assumes an average enterprise value/sales multiple of 4 times for acquisitions.

In our base-case scenario, we forecast a roughly 250-basis-point expansion of the operating margin from fiscal 2025 levels, as we believe that volume leverage and the firm’s continuous improvement initiatives will continue to drive increased profitability. For our midcycle assumption, we model a roughly 28.5% operating margin. We assume an 8% weighted average cost of capital and an 18% long-run effective tax rate in our model.

We believe that Nordson has established a wide moat based primarily on customer switching costs and secondarily on intangible assets. Nordson manufactures equipment used for dispensing adhesives, sealants, coatings, and other materials. The firm differentiates itself by making products that play a vital role in a customer’s operations (for example, parts of a production line or components used in medical equipment) but represent a relatively small fraction of a customer’s total bill of materials. Nordson strives to create added value for customers by making highly engineered and customizable equipment that reduces a client’s total cost of ownership by improving efficiency and reliability, reducing unscheduled downtime, and minimizing wasted material.

The cornerstone of Nordson’s wide moat is its large installed base of equipment. Given that Nordson’s equipment often performs a critical function in the production process, we believe that customers tend to replace components like-for-like and are reluctant to switch vendors, as the potential cost of unscheduled downtime could far outweigh incremental cost savings from switching to a cheaper alternative. For example, the industrial precision solutions segment manufactures products and systems that are components of a production line and thus tightly integrated into a customer’s manufacturing process. As such, switching to a competitor’s equipment might require costly downtime and possibly modifications to the production line. Furthermore, Nordson’s dispensing systems typically account for a fraction of the total cost of production lines used to manufacture automotive components, smartphones, or semiconductors, but play an important role in the manufacturing process. We believe that this results in sticky customer relationships as clients want to ensure that their production lines continue to operate smoothly.

Nordson generates a healthy stream of recurring revenue tied to its large installed base, as over half of its sales are generated from aftermarket parts and consumables. For example, hoses, nozzles, pumps, and other components have to be periodically replaced due to constant wear and tear, which creates steady demand for aftermarket parts. As such, each capital equipment sale expands Nordson’s installed base and helps grow the relatively predictable and high-margin stream of cash flows from replacement parts and consumables.

In recent years, Nordson has focused on growing its medical business through acquisitions, which has increased the firm’s recurring revenue from consumables. For example, the Plas-Pak business, acquired in 2017, generates revenue from syringes, cartridges, and other components. We believe this acquisition fits into Nordson’s overall strategy of selling goods that have a low cost but create added value for customers. We expect the company will continue to pursue similar bolt-on and tuck-in acquisitions to expand its medicine business, and we think this strategy will contribute to the firm’s moat by growing its recurring revenue stream and by further tightening its relationships with medical device original equipment manufacturers.

We also see Nordson benefiting from intangible assets, including its reputation for quality, long-standing and sticky customer relationships with OEMs, as well as its engineering prowess and extensive patent portfolio (over 2,100 patents as of October 2025). Nordson invests nearly 3% of sales in research and development, which is nearly 1% more than its peers; we think this should help protect its competitive position.

In addition to investing in research and development, Nordson has historically pursued M&A deals to broaden its portfolio of solutions and enter into adjacent markets. For example, the company has used M&A to expand its test and inspection business in recent years. In many end markets, there is a trend toward smaller products (for example, smartphones and semiconductor chips). As the components get smaller, it becomes increasingly challenging to ensure that coatings are applied evenly. Acquisitions have helped broaden Nordson’s portfolio of solutions to enable accurate testing in the semiconductor and electronics end markets, including X-ray inspection and acoustic microscopy. Nordson’s acquisition strategy has allowed the firm to enter into adjacent niche markets and expand its ability to handle specialty materials.

Nordson is poised to benefit from innovation in its end markets, including autonomous vehicles, 5G, and 3D wafer stacking, as new technologies drive demand for its dispensing solutions.

Over half of Nordson’s revenue is recurring, which helps mitigate the firm’s exposure to cyclical end markets.

Nordson has a large installed base of equipment and strong share across a number of niche end markets.

The company regularly invests in M&A to boost revenue growth, which creates the risk of overpaying for acquisition targets.

Nordson has exposure to cyclical end markets including the automotive, electronics, and construction sectors.

Cost inflation, tariffs, and persistent strength in the US dollar could have an adverse impact on the firm’s profitability.