Nordson's Expenses are on the Rise: Will It Affect Margins?

Nordson Corporation NDSN has been grappling with rising costs and expenses over time. NDSN reported an uptick in costs and expenses during the third quarter of fiscal 2025 (ended July 2025). The company’s cost of sales increased 14.5% year over year in the fiscal third quarter. The metric as a percentage of total revenues rose 100 basis points to 45.2%. In the same period, the selling and administrative (SG&A) expenses grew 2.3% year over year. Key factors behind the company’s high SG&A expenses included rising acquisition costs and amortization expenses.

Despite the rising costs, NDSN’s EBITDA margin increased 70 basis points year over year to 32% in the fiscal third quarter. The improvement in margin was driven by increased sales for electronic processing and optical sensors, as well as electronics dispensing product lines within the Advanced Technology Solutions segment. Synergistic gains from the Atrion acquisition also bode well. Nordson reported total revenues of $742 million in the quarter, which increased 12% year over year. 

The company is witnessing several positive trends that hold promise for its long-term growth. Strong customer demand for the nonwovens, precision agriculture, packaging and consumer non-durable product lines is will likely drive NDSN’s performance. Nordson’s continued focus on operational excellence and disciplined portfolio management is expected to support its margin performance in the quarters ahead.

Margin Performance of NDSN’s Peers

Among its major peers, Applied Industrial Technologies, Inc. AIT is facing cost pressure. Applied Industrial’s cost of sales was up 5.7% year over year to $850 million in the fourth quarter of fiscal 2025. In the same period, Applied Industrial’s gross margin decreased to 30.6% from 30.7% reported in the year-ago quarter.

In the second quarter of 2025, Flowserve Corporation’s FLS cost of sales decreased 1.2% year over year to $781.5 million. Flowserve’s gross margin increased 260 basis points to 34.2% in the same period. Flowserve’s selling, general and administrative expenses increased 11.4% year over year in the second quarter.

NDSN’s Price Performance, Valuation and Estimates

Shares of Nordson have declined 14% in the past year against the industry’s growth of 2.2%.

From a valuation standpoint, NDSN is trading at a forward price-to-earnings ratio of 20.95X, above the industry’s average of 20.54X. Nordson carries a Value Score of D.

The Zacks Consensus Estimate for NDSN’s fiscal 2025 earnings has increased 0.7% over the past 60 days.

The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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