By Sam Boughedda
KeyBanc Capital Markets analysts upgraded shares of Nordson Corporation (NASDAQ:NDSN) to Overweight with a $255 price target on Wednesday.
The analysts said that the firm has been waiting for a better entry point around negative semi/electronics volatility and believe these situations are "often the best time to buy NDSN shares."
"Electronics (now ATS) has always been the tail that wags the dog for NDSN, and we have believed in buying dips around electronics weakness, while avoiding the name when electronics sentiment is too high," wrote the analysts. "Although this volatility has reared its head again, we think management has taken numerous steps to diversify the portfolio and mitigate risk around the semi/electronics cycle."
In addition, they stated that after the company's guidance cut, they believe its EPS is de-risked, while they also "appreciate NDSN's best-in-class returns, execution around NBS Next, and constructive capital allocation."
"Over the past few years, through the divestiture of an unprofitable non-core business, a greater focus on profitable growth, and attention to operational acumen, operating margins have increased ~+500 bps and are now above the Company's LT targets," the analysts explain.
"By taking a more constructive approach to 80/20 (i.e., focusing on growing the most-profitable businesses and product lines vs. culling the bottom quadrant), we think the strategy will benefit the company's top- and bottom-line performance over the LT."