Core Points - Veralto Corporation will host its third quarter 2025 earnings conference call on October 29, 2025, at 8:30 a.m. ET [1] - The company has annual sales exceeding $5 billion and is recognized for its essential technology solutions [3] Company Information - Veralto is headquartered in Waltham, Massachusetts, and employs nearly 17,000 associates globally [3] - The company focuses on providing solutions that ensure access to clean water, safe food, and trusted essential goods [3]

Core Insights - Veralto Corporation (VLTO) is valued at a market cap of $26.3 billion and specializes in water analytics, treatment, marking and coding, and packaging solutions [1] - The company is set to announce its fiscal Q3 earnings for 2025 on October 22 [1] Financial Performance - Analysts expect VLTO to report a profit of $0.95 per share for Q3 2025, reflecting a 6.7% increase from $0.89 per share in the same quarter last year [2] - For fiscal 2025, the expected profit is $3.78 per share, up 6.8% from $3.54 in fiscal 2024, with further growth anticipated to $4.15 per share in fiscal 2026, representing a 9.8% year-over-year increase [3] Recent Developments - In Q2, Veralto's total sales reached $1.4 billion, marking a 6.4% year-over-year increase and exceeding consensus estimates by 2.2% [5] - The adjusted EPS for Q2 was $0.93, which is a 9.4% improvement from the previous year and surpassed analyst estimates by 4.5% [5] Stock Performance - Over the past 52 weeks, Veralto's shares have declined by 4.3%, underperforming compared to the S&P 500 Index's 17.6% rise and the Industrial Select Sector SPDR Fund's 14% increase [4] - Following the release of better-than-expected Q2 results, shares surged by 1.9% in the subsequent trading session [5] Analyst Sentiment - Wall Street analysts maintain a "Moderate Buy" rating for VLTO, with 10 out of 18 analysts recommending "Strong Buy" and 8 suggesting "Hold" [6] - The mean price target for Veralto is $116.62, indicating a potential upside of 9.5% from current levels [6]

Core Insights - Veralto Corporation (VLTO) is strengthening its leadership in the Water Quality segment, capitalizing on growth opportunities in the U.S. industrial and municipal sectors [1][4] - The CHIPS Act of 2022 is a significant tailwind for VLTO, enhancing semiconductor production which requires ultra-pure water, a critical input for advanced chip manufacturing [1][4] - Long-term demand for digital tools and technologies is expected to drive sustained growth in semiconductor production, benefiting VLTO's water solutions [2] Industrial Sector - The semiconductor sector, despite recent challenges, has a positive long-term outlook due to rising demand for digital tools, AI, and autonomous technologies [2] - VLTO's focus on high-purity applications for semiconductors differentiates it from competitors like Xylem (XYL), positioning the company to capture a significant market share [2] - Xylem continues to innovate in industrial water treatment, indicating a competitive yet expanding sector [2] Municipal Sector - Increased U.S. government funding for water infrastructure improvements is a strong catalyst for growth in the municipal sector [3] - Investments aimed at modernizing water systems across the U.S. are expected to enhance demand for VLTO's scalable water solutions [3] - The company's ability to provide tailored solutions positions it well to benefit from these initiatives, alongside competitors like Pentair (PNR) [3]

Company Overview - Veralto Corporation (VLTO) is valued at a market cap of $26.4 billion and provides essential technology solutions for water quality, product identification, and environmental monitoring [1] - The company is classified as a "large-cap stock," highlighting its size and influence in the pollution and treatment controls industry [2] Financial Performance - In Q2, Veralto reported total sales of $1.4 billion, a year-over-year increase of 6.4%, with core sales rising by 4.8% [5] - The company's adjusted EPS was $0.93, reflecting a 9.4% increase from the previous year, surpassing analyst estimates of $0.89 [5] Stock Performance - Currently, VLTO is trading 7.4% below its 52-week high of $115, reached on October 24, 2024 [3] - Over the past three months, VLTO shares have surged 9%, outperforming the VanEck Environmental Services ETF (EVX), which returned 1.6% [3] - However, VLTO has underperformed over the past 52 weeks, declining by 3.1%, while EVX increased by 7.2% [4] Analyst Sentiment - Analysts maintain a moderately optimistic outlook for Veralto, with a consensus rating of "Moderate Buy" from 17 analysts [6] - The mean price target for VLTO is $116.40, indicating a potential 9.3% premium to its current price levels [6]

Core Viewpoint - Veralto (VLTO) has received an upgrade to a Zacks Rank 2 (Buy), indicating a positive outlook on its earnings estimates, which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Performance - The Zacks rating system is based on changes in earnings estimates, which have a strong correlation with near-term stock price movements [4][6]. - For Veralto, the recent upgrade reflects an improvement in the company's underlying business, likely leading to increased stock prices due to investor confidence [5][10]. Earnings Estimate Revisions - Veralto is projected to earn $3.78 per share for the fiscal year ending December 2025, with no year-over-year change expected [8]. - Over the past three months, the Zacks Consensus Estimate for Veralto has increased by 3%, indicating a positive trend in earnings estimates [8]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with only the top 20% receiving a "Strong Buy" or "Buy" rating [9][10]. - The upgrade of Veralto to a Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, suggesting potential for market-beating returns in the near term [10].

Core Insights - Veralto (VLTO) reported strong Q2 2025 results, with adjusted earnings of 93 cents per share, exceeding estimates by 4.5% and increasing 9.4% year-over-year. Total revenues reached $1.37 billion, surpassing consensus estimates by 2.1% and rising 6.4% from the previous year [1][11]. Group 1: Growth Opportunities - VLTO's leadership in the Water Quality segment positions it well to leverage growth opportunities in the U.S., driven by industrial and municipal sectors. The CHIPS Act of 2022 is expected to enhance semiconductor manufacturing, providing additional growth in the industrial vertical [2]. - Increased U.S. government funding aimed at addressing water infrastructure issues serves as a strong catalyst for growth in the municipal vertical, likely boosting demand for VLTO's services [3]. Group 2: Strategic Acquisitions - The acquisition of TraceGains enhances the Product Quality and Innovation (PQI) segment by integrating advanced digital workflow solutions, particularly benefiting the food and beverage industry. This acquisition improves supply-chain traceability and compliance, accelerating time-to-market for consumer brands [4]. Group 3: Financial Stability - VLTO demonstrates a robust liquidity position, with a current ratio of 2.32, significantly above the industry average of 1.04, indicating strong financial stability and the ability to meet short-term liabilities [5]. - Since its NYSE listing in late 2023, VLTO has maintained a commitment to shareholder returns, recently increasing its quarterly dividend by 22% to 11 cents per share, reflecting confidence in its financial strength and growth prospects [6]. Group 4: Market Challenges - As a newer market entrant, VLTO has experienced share price volatility while establishing a stable market presence, which may deter risk-averse investors who prefer stocks with a longer trading history [7]. - Competitive pressures from established companies and new entrants in the PQI and digital workflow solution markets pose challenges for VLTO, as competitors may offer similar technologies at lower prices, potentially impacting market share and profitability [8].

Company Overview - Veralto Corporation, headquartered in Waltham, Massachusetts, specializes in water analytics, water treatment, marking and coding, and packaging and color services globally [11] - The company was spun off from Danaher Corporation in 2023 and employs nearly 17,000 people, with significant operations in North America, Western Europe, and high-growth markets [11] Investment Ratings - Veralto is rated 2 (Buy) on the Zacks Rank, indicating a positive outlook for the stock [11] - The company has a VGM Score of B, suggesting it has attractive value, growth, and momentum characteristics [11][12] Performance Metrics - Veralto's Momentum Style Score is A, and its shares have increased by 1% over the past four weeks [11] - In the last 60 days, three analysts have revised their earnings estimates upwards for fiscal 2025, with the Zacks Consensus Estimate rising by $0.08 to $3.78 per share [12] - The company has an average earnings surprise of +6.3%, indicating a strong performance relative to expectations [12]

Core Insights - Veralto Corporation (VLTO) reported strong second-quarter 2025 results, with earnings and revenues exceeding the Zacks Consensus Estimate [1][6] - Adjusted earnings per share were 93 cents, surpassing estimates by 4.5% and increasing 9.4% year over year [1][6] - Total revenues reached $1.37 billion, beating the consensus estimate by 2.1% and rising 6.4% from the previous year [1][6] Financial Performance - The Water Quality segment generated revenues of $825 million, reflecting a year-over-year growth of 6.2% [4] - The Product, Quality & Innovation segment saw revenues increase by 6.9% year over year to $546 million [4] - Adjusted EBITDA was $285 million, marking a 5.6% increase from the same quarter last year, with an adjusted operating EBITDA margin improvement to 20.79% [4] Cash Flow and Debt - At the end of Q2, Veralto had cash and cash equivalents of $1.56 billion, up from $1.1 billion at the end of the previous quarter [5] - Long-term debt was reported at $2.67 million, a slight increase from $2.60 billion at the end of Q4 2024 [5] - The company generated $496 million in cash from operating activities during the quarter, with capital expenditures of $16 million [5] Future Guidance - For Q3 2025, Veralto anticipates mid-single-digit revenue growth year over year and adjusted diluted earnings per share between 91 cents and 95 cents [7] - The full-year 2025 adjusted earnings per share guidance has been raised to a range of $3.72 to $3.80, up from $3.60 to $3.70 [8] - The company targets a free cash flow conversion rate of 90% to 100% and has increased its core sales growth assumption to mid-single-digits [8]

Financial Data and Key Metrics Changes - Total sales grew 6.4% year over year to $1.37 billion, with core sales growth of 4.8% driven by broad-based volume gains across both segments [21][22] - Adjusted earnings per share increased 9.4% year over year to $0.93, exceeding guidance due to better-than-expected sales volumes [14][23] - Free cash flow generation was strong at $323 million, an increase of $83 million year over year, reflecting effective cash management [30][31] Business Line Data and Key Metrics Changes - Water Quality segment sales reached $825 million, up 6.2% year over year, with core sales growth of 5% driven by strong demand for water analytics and treatment solutions [24][26] - PQI segment sales grew 6.8% year over year to $546 million, with core sales growth of 4.6% supported by recurring revenue and equipment shipments [27][29] Market Data and Key Metrics Changes - Core sales growth in Western Europe was 6.3%, led by double-digit growth in water quality, while North America saw core sales growth of 5.6% [14][16] - High growth markets experienced over 6% core sales growth year over year, with notable performance in Latin America and India [20] Company Strategy and Development Direction - The company raised its full-year adjusted earnings per share guidance to a range of $3.72 to $3.80, reflecting stable demand and positive macroeconomic conditions [10][32] - The capital allocation strategy remains focused on acquisitions, with a commitment to invest in emerging technology-oriented businesses [11][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating a dynamic macroeconomic environment, citing strong secular growth drivers in water quality and essential goods [36][37] - The company anticipates continued strong performance in the second half of the year, supported by robust demand and effective execution of its business model [36][58] Other Important Information - The company announced a €20 million commitment to invest in Emerald Technology Ventures Global Water Fund II, enhancing its innovation and technology development efforts [11] - Adjusted operating profit margin for the quarter was 23.7%, with expectations for margin expansion in the second half of the year [22][33] Q&A Session Summary Question: Can you provide more details on core water quality growth by region? - Management indicated that their water quality business is resilient to fluctuations in government funding, driven by secular trends such as water reuse and sustainability goals [44][45] Question: What is the impact of tariffs and pricing on PQI margins? - Management explained that margin compression was due to acquisitions, timing of pricing actions, and investments, with expectations for gradual improvement in the second half of the year [48][51] Question: How is the company positioned in the UK water utility market? - Management expressed confidence in capitalizing on opportunities in the UK, leveraging direct sales to customers to identify and act on local opportunities [105][106]

Financial Data and Key Metrics Changes - Total sales grew 6.4% year over year to $1.37 billion, with currency providing a 150 basis point tailwind [20] - Adjusted earnings per share increased 9.4% year over year to $0.93, exceeding guidance due to higher sales volumes [22] - Free cash flow generation was $323 million, an increase of $83 million year over year [22] Business Line Data and Key Metrics Changes - Water Quality segment sales reached $825 million, up 6.2% year over year, with core sales growth of 5% [22][23] - PQI segment sales grew 6.8% year over year to $546 million, with core sales growth of 4.6% [24][25] - Water Quality's adjusted operating profit increased 11.5% to $214 million, with a margin of 25.9% [24] - PQI's adjusted operating profit was $140 million, flat year over year, with a margin of 25.6% [28] Market Data and Key Metrics Changes - Core sales growth in Western Europe was 6.3%, led by double-digit growth in water quality [13] - North America saw core sales growth of 5.6%, with both segments generating growth above 5% [13] - High growth markets experienced over 6% sales growth year over year, with high single-digit growth in PQI [13] Company Strategy and Development Direction - The company raised its full-year adjusted EPS guidance to a range of $3.72 to $3.80 per share, reflecting stable demand and macroeconomic conditions [9][31] - The capital allocation strategy remains focused on acquisitions to fuel long-term shareholder value [10][30] - The company is investing in emerging technology-oriented businesses, such as a €20 million commitment to Emerald Technology Ventures Global Water Fund II [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating a dynamic macroeconomic environment, citing strong demand for technology solutions [34] - The company anticipates continued growth driven by secular trends in water reuse and sustainability [42] - Management noted that the infrastructure supporting technology and AI growth will strain water capacity, positioning the company well to meet these needs [15] Other Important Information - The company achieved mid-single-digit core sales growth for four consecutive quarters, demonstrating the durability of its business model [7] - Adjusted operating profit margin was 23.7%, consistent with underlying guidance assumptions [12][21] Q&A Session Summary Question: Can you provide more details on core water quality growth by region? - Management indicated that their water quality business is resilient to government funding fluctuations, driven by secular trends in water reuse and sustainability [41] Question: What is the impact of tariffs and pricing on PQI margins? - Management explained that margin compression was due to acquisitions, timing differences in pricing actions, and investments, with expectations for gradual improvement in the second half of the year [46][49] Question: How is the company positioned in the current M&A market? - Management stated that the M&A pipeline is active, with a focus on identifying attractive markets and companies, while maintaining a disciplined approach to capital allocation [62] Question: What is the outlook for the UK water utility market? - Management expressed confidence in capitalizing on increased spending opportunities in the UK, leveraging their direct sales approach [102] Question: How is the company addressing the challenges in the Chinese market? - Management noted that while water quality sales in China have been flat, they are executing well within available opportunities [94]