Veralto (VLTO) appears an attractive pick, as it has been recently upgraded to a Zacks Rank #2 (Buy). This upgrade is essentially a reflection of an upward trend in earnings estimates -- one of the most powerful forces impacting stock prices.A company's changing earnings picture is at the core of the Zacks rating. The system tracks the Zacks Consensus Estimate -- the consensus measure of EPS estimates from the sell-side analysts covering the stock -- for the current and following years.Since a changing earn ...

Core Viewpoint - Veralto Corporation (VLTO) is a technology company focused on water analytics, treatment, and related solutions, currently valued at a market cap of $24.4 billion [1] Financial Performance - In Q3, VLTO reported total revenue of $1.4 billion, a 6.8% year-over-year increase, meeting analyst estimates [4] - The adjusted EPS for Q3 was $0.99, an 11.2% increase from the previous year, surpassing consensus estimates of $0.95 [4] - For the current fiscal year, analysts expect VLTO's EPS to grow 8.5% year-over-year to $3.84 [5] Stock Performance - Over the past 52 weeks, VLTO shares have declined by 4.5%, while the S&P 500 Index has gained 13.7% [2] - Year-to-date, VLTO is down 3.7%, compared to a 13.4% increase in the S&P 500 [2] - VLTO has also underperformed compared to the Invesco Global Water ETF, which rose by 8.8% over the past 52 weeks [3] Analyst Ratings and Price Targets - The consensus rating for VLTO among 18 analysts is a "Moderate Buy," with 10 "Strong Buy" and 8 "Hold" ratings [5] - UBS Group AG maintained a "Neutral" rating on VLTO and raised its price target to $112, indicating a 14.2% potential upside [6] - The mean price target of $115.88 suggests an 18.2% premium from current levels, while the highest price target of $125 indicates a 27.5% potential upside [6] Guidance - VLTO raised its fiscal 2025 adjusted EPS guidance to a range of $3.82 to $3.85 [4]

Industry Overview - The U.S. Business Services Sector is supported by strong domestic economic fundamentals, encompassing companies that provide consulting, staffing, financial transactions, outsourcing, advertising, waste removal, building maintenance, technology services, and auction/valuation services [1] - The sector has evolved into a mature and resilient ecosystem, with revenues, income, and cash flows now above pre-pandemic levels [2] - The rapid advancement and adoption of artificial intelligence and automation technologies are reshaping the delivery of business services [2] Sector Performance - The Zacks-defined Business Services Sector ranks in the top 38% of the Zacks Sector Rank, indicating an expectation to outperform the market over the next three to six months [3] Recommended Stocks - Five business services stocks with favorable Zacks Rank are recommended: Xylem Inc. (XYL), Thomson Reuters Corp. (TRI), UL Solutions Inc. (ULS), Omnicom Group Inc. (OMC), and Veralto Corp. (VLTO), all carrying a Zacks Rank 2 (Buy) [4] Company Insights Xylem Inc. (XYL) - Xylem experiences steady demand due to the essential nature of its offerings, benefiting from robust demand for smart metering and applications in the U.S. [5] - The Water Infrastructure unit's performance is boosted by growth in transport and treatment application businesses, with an expected revenue growth rate of 3.7% and earnings growth rate of 9.6% for next year [6] Thomson Reuters Corp. (TRI) - Thomson Reuters is a leading provider of value-added information and technology across various sectors, including law, tax, accounting, and healthcare [7] - The company has an expected revenue growth rate of 7.8% and earnings growth rate of 14.2% for next year [8] UL Solutions Inc. (ULS) - UL Solutions provides safety science services across multiple segments, including Industrial, Consumer, and Software and Advisory [9] - The company has an expected revenue growth rate of 5.4% and earnings growth rate of 6.5% for next year [10] Omnicom Group Inc. (OMC) - Omnicom Group's diverse portfolio across traditional and digital marketing segments ensures revenue stability and adaptability [11] - The company has an expected revenue growth rate of 3.2% and earnings growth rate of 6.9% for next year [13] Veralto Corp. (VLTO) - Veralto is positioned for growth through U.S. infrastructure investments and rising semiconductor demand, with a strong focus on water quality and product quality segments [14][15] - The company has an expected revenue growth rate of 5.8% and earnings growth rate of 9.3% for next year [17]

Core Insights - Veralto announced the appointment of Kimberly Y. (Kim) Chainey as Senior Vice President and Chief Legal Officer, effective December 1, 2025, reporting to President and CEO Jennifer L. Honeycutt [1][2] Company Overview - Veralto is a global leader in essential technology solutions with annual sales exceeding $5 billion, focusing on clean water, safe food, and trusted essential goods [5] - The company is headquartered in Waltham, Massachusetts, and employs nearly 17,000 associates dedicated to making a positive impact on the world [5] Leadership Background - Chainey has over 20 years of experience advising C-suite executives and boards at Global 100 and Fortune 500 companies, leading legal, regulatory, compliance, and government relations functions [2] - Prior to joining Veralto, Chainey held legal leadership roles at Aptar Group, Panasonic Aviation Corporation, Avis Budget Group, the Hershey Company, and Morgan Lewis [2] Chainey's Vision and Contributions - Chainey expressed admiration for Veralto's impact on public safety and emphasized her commitment to guiding organizations through complex legal and strategic challenges [3] - She holds a bachelor's degree in environmental science and public policy from Harvard University, along with a Juris Doctor and MBA from the University of Pennsylvania [3] Recognition and Awards - Chainey has received multiple accolades, including being named a 2025 Legends in Law by the Burton Awards and recognized as one of the Most Influential Women in Corporate America by Savoy Magazine [4]

Core Viewpoint - The investment outlook for Veralto (VLTO) remains positive due to intact structural tailwinds and reasonable valuation, leading to a bullish stance on the stock [1]. Group 1: Investment Strategy - The investment approach focuses on long-term investments while also incorporating short-term shorts to identify alpha opportunities [1]. - The analysis is based on a bottom-up approach, examining the fundamental strengths and weaknesses of individual companies [1]. - The investment duration is medium to long-term, targeting companies with solid fundamentals, sustainable competitive advantages, and growth potential [1].

Core Insights - Emerald Technology Ventures has announced the first close of its Global Water Fund II at €60 million, aiming to advance water innovation globally [1][5] - The fund is targeting a total size of €150–180 million and will invest in early to growth stage companies across the water value chain [2] Investment Focus - The fund will focus on solutions in infrastructure and business resilience, advanced treatment, reuse, digitally enhanced monitoring, prediction, decision making, automation, and technologies addressing emerging contaminants [2][3] - The strong backing from industry leaders such as Veralto Corporation and Ecolab highlights a cross-sector commitment to solving global water challenges [1][3] Historical Context - The new fund builds on the success of Emerald's inaugural Global Water Fund, which closed in 2020 with $100 million in commitments from top-tier investors [4] - The first fund has facilitated key collaborations and successful exits of portfolio companies to major industry players like SUEZ, Xylem, and BASF [4] Market Response - There has been strong interest in the fund, indicating that water innovation is both a pressing global need and an attractive investment opportunity [5]

Key Takeaways VLTO's Q3 EPS rose 11.2% to $0.99, beating estimates, while revenues grew 6.9% to $1.4B. Water Quality revenues climbed 6.9% to $856M; Product, Quality & Innovation sales rose 6.8% to $548M.Full year EPS guidance lifted to $3.82$3.85, with cash flow conversion expected near 100%.Veralto Corporation (VLTO) reported impressive third-quarter 2025 results, with earnings and revenues beating the Zacks Consensus Estimate.Quarterly adjusted earnings of 99 cents per share surpassed the consensus mark ...

Veralto (NYSE:VLTO) Q3 2025 Earnings Call October 29, 2025 08:30 AM ET Company ParticipantsJacob Levinson - Director and Associate Director of ResearchAndy Kaplowitz - Managing DirectorAndrew Krill - DirectorRyan Taylor - VP of Investor RelationsSameer Ralhan - SVP and CFODeane Dray - Managing DirectorJennifer Honeycutt - President and CEOJohn McNulty - Managing DirectorBrian Lee - VPConference Call ParticipantsAndrew Buscaglia - Senior AnalystNathan Jones - Senior Equity AnalystWill Grippin - Director and ...

Financial Data and Key Metrics Changes - Total sales grew 6.9% year over year to $1.4 billion, with core sales growth of 5.1% driven by a 2.7% increase in volume and a 2.4% increase in price [16][17] - Adjusted EPS grew 11% year over year to $0.99, exceeding the high end of guidance by $0.04 [12][17] - Free cash flow generation was strong at $258 million, a 20% increase year over year [17][23] Business Line Data and Key Metrics Changes - Water Quality segment sales were $856 million, up 7% year over year, with core sales growth of 5.3% driven by strong demand for water analytics and treatment solutions [18][19] - PQI segment sales grew 6.9% year over year to $548 million, with core sales growth of 4.6% driven by pricing and volume increases [19][20] Market Data and Key Metrics Changes - North America, accounting for 50% of total business, saw core sales grow 6.9%, with high single-digit growth in PQI and mid-single-digit growth in Water Quality [12][16] - High growth markets experienced a core sales increase of 4.3%, with notable growth in the Middle East, Latin America, and India [15] Company Strategy and Development Direction - The company raised its full-year adjusted EPS guidance to a range of $3.82 to $3.85 per share, indicating confidence in ongoing growth [8][24] - The capital allocation strategy is focused on acquisitions, with a pipeline of opportunities in water quality and product quality innovation [8][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating a dynamic macro environment, highlighting the importance of their technologies in supporting customer operations [6][28] - The company anticipates continued mid-single-digit core sales growth and double-digit adjusted EPS growth for the remainder of the year [27][28] Other Important Information - The company published its annual sustainability report, emphasizing its commitment to reducing carbon footprint and supporting environmental health [9] - Recurring revenue grew high single digits year over year, comprising 62% of total sales, indicating a strong and sticky business model [16][20] Q&A Session Summary Question: Clarification on tariffs and government shutdown impacts - Management indicated that pricing actions have effectively offset tariff impacts, and there has been no material impact from the government shutdown [34][36] Question: Comments on demand pace in China - Management noted that demand in China is performing as expected, with no significant changes in total sales [38] Question: Durability of strength in the water quality business - Management highlighted strong double-digit growth in data center-related sales, indicating a strategic priority in this area [44][45] Question: Insights on M&A opportunities - Management confirmed an active pipeline for M&A opportunities, emphasizing a disciplined approach to capital allocation [66] Question: Trends in water quality pricing - Management stated that pricing has been strategically executed, with expectations for continued price contributions in the future [63][111]

Financial Data and Key Metrics Changes - Total sales grew 6.9% year over year to $1.4 billion, with core sales increasing by 5.1% driven by both volume and price increases [13][14] - Adjusted EPS grew 11% year over year to $0.99, exceeding the high end of guidance by $0.04 [15][24] - Free cash flow generation was strong, with $258 million generated in the third quarter, a 20% increase year over year [15][20] Business Line Data and Key Metrics Changes - Water Quality segment sales were $856 million, up 7% year over year, with core sales growing 5.3% [16][17] - PQI segment sales grew 6.9% year over year to $548 million, with core sales increasing by 4.6% [17][18] - Recurring revenue grew high single digits year over year, comprising 62% of total sales [14][15] Market Data and Key Metrics Changes - In North America, which accounts for 50% of total business, core sales grew 6.9%, led by high single-digit growth in PQI and mid-single-digit growth in Water Quality [9][10] - Core sales in high growth markets increased by 4.3%, with notable growth in the Middle East, Latin America, and India [12] - Core sales into China grew low single digits in both segments, performing as expected [34] Company Strategy and Development Direction - The company raised its full year adjusted EPS guidance to a range of $3.82 to $3.85 per share, indicating confidence in continued growth [5][24] - The capital allocation strategy is focused on acquisitions, with a pipeline of opportunities in both water quality and product quality innovation [5][22] - The company emphasizes sustainability, having published its annual sustainability report and achieved significant milestones in environmental contributions [6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating a dynamic macro environment, highlighting the essential need for technology solutions in clean water and safe food [25] - The company expects continued mid-single-digit core sales growth for the full year, with favorable currency rates contributing positively [22][23] - Management noted that the pricing strategy has effectively offset tariff impacts, and they remain vigilant in monitoring the operating environment [31][32] Other Important Information - The company achieved over 100% free cash flow conversion, reflecting strong operational execution [5][15] - The water quality segment saw strong demand for water analytics and treatment solutions, particularly in industrial markets [11][17] Q&A Session Summary Question: Clarification on tariffs and government shutdown impacts - Management indicated that pricing actions have effectively offset tariff impacts, and there has been no material impact from the government shutdown [30][32] Question: Comments on demand pace in China - Management noted that demand in China is performing as expected, with no significant changes in total sales [34] Question: Durability of strength in water quality business - Management highlighted strong double-digit growth in data center-related sales, indicating a strategic priority for the company [41][42] Question: Expectations for PQI margins and pricing - Management acknowledged that while tariffs have impacted margins, they expect to see improvements as they lap the tariff effects in 2026 [45][46] Question: Growth in high-growth markets - Management reported strong growth in high-growth markets, particularly in Latin America and India, driven by infrastructure development [89][90] Question: Recurring revenue growth drivers - Management stated that both equipment and consumables are growing strongly, with software-based businesses also contributing to recurring revenue [91][92]