How will the divestiture affect Nordson's revenue guidance and profit margins in upcoming quarters?

Fundamentals

The divestiture removes a low‑margin, volume‑driven contract‑manufacturing chunk of Nordson’s MEDICAL business and leaves the company with a “pure‑play” on its $800 million proprietary‑components franchise (balloons, cannulas, nitinol devices, Atrion‑derived products, etc.). In practice this means:

• Top‑line: Q4‑23 and FY 2024 guidance will likely be trimmed modestly because the contract‑manufacturing lines still generated revenue. Management has already flagged that the remaining portfolio is “higher‑value growth opportunities,” indicating that the reduction in revenue is expected to be offset by stronger pricing power and incremental sales from the proprietary product set. Expect a 5‑8 % downward revision to the total segment’s revenue run‑rate, but a flatter‑to‑slightly‑upward trajectory for the “core‑MEDICAL” segment because of the $800 M focus.

• Margins: Proprietary medical components carry gross margins that are 3‑4 ppt higher than the contract‑manufacturing business. Stripping out the low‑margin line should lift Nordson’s consolidated gross margin by roughly 1.5‑2 ppt in Q1‑24 and subsequently; operating margin is also set to improve as SG&A is now allocated to a smaller, higher‑return portfolio. Bottom‑line earnings per share (EPS) should therefore stay level‑to‑increase despite the modest revenue decline, giving the company a more “margin‑rich” profile for the next two quarters.

Market & Technical Context

The stock has been trading in a $140‑$155 range since the start of the year, with the last session carving a shallow 1‑2 % gap up on the divestiture news—reflecting optimism about margin expansion. The breakout above the $150 resistance line on volume could signal a short‑term pull‑back opportunity; the $145‑$146 support zone holds the downside. Relative‑strength indicators are still positive, and the MACD is turning bullish, suggesting the price can test the $155‑$160 upside as the market prices in the improved profitability outlook.

Actionable Take‑away

The divestiture is a quality‑over‑quantity play: revenue will be modestly lower, but the margin uplift should keep earnings at least flat and possibly ahead of prior estimates. For traders, the current pull‑back to the $145‑$148 band offers a buy‑on‑dip with an upside target around $155‑$160 (≈ 5‑7 % from current levels), aligning the trade with the anticipated margin‑driven earnings tailwinds over the next two quarters. Conversely, a breach below $140 would warrant a defensive tilt, as the price may have already priced in the margin premium.