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Veralto's Q3 Earnings Beat Estimates on Strong Sales & Margins
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Key Takeaways
Veralto's Q3 earnings rose 19.2% y/y to $1.18 per share, while revenues climbed 7.5% to $1.51 billion.
Water Quality revenues jumped 9.8%, while cost savings expanded VLTO's adjusted operating margin by 170 bps.
Veralto raised its 2026 adjusted EPS guidance to $4.49-$4.52 and core sales growth outlook to 4.2-4.5%.
Veralto Corporation (VLTO - Free Report) reported impressive third-quarter 2026 results, with earnings and revenues beating the Zacks Consensus Estimate.
VLTO’s adjusted earnings of $1.18 per share surpassed the consensus estimate of $1.10 by 7.3% and increased 19.2% year over year, driven by core sales growth, operating leverage and cost efficiencies. Revenues of $1.51 billion topped the consensus estimate by 0.7% and rose 7.5% year over year. Core sales grew 5.1%, led by Water Quality’s 6.4% growth, while acquisitions contributed to the top line.
Veralto Corporation Price, Consensus and EPS Surprise
Over the past year, VLTO's shares have gained 12.3%, outperforming the industry's 3% and the Zacks S&P 500 composite’s 9.9% growth.
Image Source: Zacks Investment Research
VLTO's Pricing & Volume Drive Core Growth
Core sales growth reflected a 2.8% contribution from volume and a 2.3% increase from pricing. Acquisitions added 2.3 percentage points to reported sales growth, while favorable foreign-currency movements contributed 0.1 percentage points.
Recurring revenues increased at a high-single-digit rate and accounted for 62% of total sales. Non-recurring revenues advanced at a strong mid-single-digit pace. North America led geographic core sales growth at 7.6%, followed by Western Europe at 3.9% and high-growth markets at 1.6%.
Veralto's Water Quality Segment Delivers Strong Growth
Water Quality revenues increased 9.8% year over year to $939 million. Core sales rose 6.4%, acquisitions contributed 3% and favorable currency translation added 0.4%. Volume and pricing contributed 4.4% and 2%, respectively.
Chemical water treatment solutions delivered 11.6% core growth, supported by broad-based industrial demand in North America. Sales related to data center investments more than doubled, while chemical processing, food and beverage, power and mining applications recorded double-digit growth. Ultraviolet water treatment core sales increased 10.8%, driven by new system installations.
Water analytics maintained steady growth, supported by services, consumables and instrumentation. North American municipal sales in the Hach business increased at a high-single-digit rate. Adjusted operating profit rose 11.1% to $250 million, while the adjusted margin expanded 30 basis points to 26.6%.
VLTO's Product Quality Business Gains Momentum
Product Quality and Innovation revenues increased 3.9% year over year to $570 million. Core sales advanced 3.2%, acquisitions added 1.1% and currency movements presented a 0.4 percentage point headwind. Pricing contributed 2.6%, while volume increased 0.6%.
Marking and coding core sales grew 3%, supported by continuous ink-jet systems, consumables and services. Packaging and color operations registered 3.5% core growth, benefiting from digital workflow solutions and color measurement equipment.
Adjusted operating profit increased 15.8% to $161 million, while the adjusted margin expanded 280 basis points to 28.2%. Operational improvements and savings from the Cost Optimization Program supported profitability.
Veralto's Adjusted Margins Benefit From Cost Savings
Adjusted operating profit increased 14.9% to $386 million. The adjusted operating margin expanded 170 basis points to 25.6%, reflecting operational improvements, cost optimization savings and tariff refunds.
Operational performance contributed approximately 130 basis points to margin expansion, while cost optimization savings added 40 basis points. Tariff refunds contributed another 30 basis points, partly offset by acquisition-related dilution of 20-30 basis points.
Adjusted gross margin increased 50 basis points to 60.6%. The quarter included $4.6 million in tariff refunds under the International Emergency Economic Powers Act, providing approximately 1 cent per share to adjusted earnings.
VLTO's Reported Profit Reflects Higher Expenses
Reported operating profit declined to $298 million from $326 million in the year-ago quarter. The reported operating margin contracted to 19.7% from 23.2%.
Third-quarter adjustments included $22 million in restructuring costs, $17 million in acquisition-related intangible amortization, $10 million associated with strategic initiatives and a $39 million reduction in a tax indemnification asset. Reported net earnings increased to $253 million from $239 million, while earnings rose to $1.03 from 95 cents.
Veralto's Cash Generation Supports Capital Deployment
Operating cash flow totaled $323 million compared with $270 million a year earlier. Capital expenditures were $19 million, resulting in free cash flow of $304 million, up 17.8% year over year.
Veralto ended the quarter with $1.79 billion in cash, gross debt of $2.92 billion and net debt of $1.14 billion. During the quarter, it acquired Alfaa UV, repurchased $89 million in shares and paid $32 million in dividends. The company also repaid $700 million in senior notes.
VLTO's Q4 & Full-Year 2026 Outlook
For the fourth quarter of 2026, Veralto expects core sales growth of 5.5-6.5% and an adjusted operating margin of approximately 24.5%. Adjusted earnings are projected between $1.13 and $1.16 per share. The Zacks Consensus Estimate of earnings for the same period is $1.13 per share.
For 2026, management raised its core sales growth forecast to 4.2-4.5% from 4-4.5%. Adjusted earnings guidance increased to $4.49-$4.52 from $4.35-$4.43, implying growth of 15-16%. The Zacks Consensus Estimate of earnings for the same period is $4.41 per share.
The company expects adjusted operating margin to expand by about 50 basis points and free cash flow conversion to exceed 105% of GAAP net earnings.
Trane Technologies plc (TT - Free Report) reported better-than-expected third-quarter 2026 results. TT’s earnings per share of $4.86 outpaced the Zacks Consensus Estimate by 2.5% and increased 25.3% from the year-ago quarter. TT’s revenues of $6.76 billion surpassed the consensus estimate by 5% and improved 17.7% year over year.
ManpowerGroup (MAN - Free Report) posted mixed third-quarter 2026 results. MAN’s earnings of $1.01 per share matched the consensus mark and rose 21.7% from the year-ago quarter. MAN’s total revenues of $4.84 billion missed the consensus mark by 1.4% but increased 4.4% year over year.
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Veralto's Q3 Earnings Beat Estimates on Strong Sales & Margins
Key Takeaways
Veralto Corporation (VLTO - Free Report) reported impressive third-quarter 2026 results, with earnings and revenues beating the Zacks Consensus Estimate.
VLTO’s adjusted earnings of $1.18 per share surpassed the consensus estimate of $1.10 by 7.3% and increased 19.2% year over year, driven by core sales growth, operating leverage and cost efficiencies. Revenues of $1.51 billion topped the consensus estimate by 0.7% and rose 7.5% year over year. Core sales grew 5.1%, led by Water Quality’s 6.4% growth, while acquisitions contributed to the top line.
Veralto Corporation Price, Consensus and EPS Surprise
Veralto Corporation price-consensus-eps-surprise-chart | Veralto Corporation Quote
Over the past year, VLTO's shares have gained 12.3%, outperforming the industry's 3% and the Zacks S&P 500 composite’s 9.9% growth.
Image Source: Zacks Investment Research
VLTO's Pricing & Volume Drive Core Growth
Core sales growth reflected a 2.8% contribution from volume and a 2.3% increase from pricing. Acquisitions added 2.3 percentage points to reported sales growth, while favorable foreign-currency movements contributed 0.1 percentage points.
Recurring revenues increased at a high-single-digit rate and accounted for 62% of total sales. Non-recurring revenues advanced at a strong mid-single-digit pace. North America led geographic core sales growth at 7.6%, followed by Western Europe at 3.9% and high-growth markets at 1.6%.
Veralto's Water Quality Segment Delivers Strong Growth
Water Quality revenues increased 9.8% year over year to $939 million. Core sales rose 6.4%, acquisitions contributed 3% and favorable currency translation added 0.4%. Volume and pricing contributed 4.4% and 2%, respectively.
Chemical water treatment solutions delivered 11.6% core growth, supported by broad-based industrial demand in North America. Sales related to data center investments more than doubled, while chemical processing, food and beverage, power and mining applications recorded double-digit growth. Ultraviolet water treatment core sales increased 10.8%, driven by new system installations.
Water analytics maintained steady growth, supported by services, consumables and instrumentation. North American municipal sales in the Hach business increased at a high-single-digit rate. Adjusted operating profit rose 11.1% to $250 million, while the adjusted margin expanded 30 basis points to 26.6%.
VLTO's Product Quality Business Gains Momentum
Product Quality and Innovation revenues increased 3.9% year over year to $570 million. Core sales advanced 3.2%, acquisitions added 1.1% and currency movements presented a 0.4 percentage point headwind. Pricing contributed 2.6%, while volume increased 0.6%.
Marking and coding core sales grew 3%, supported by continuous ink-jet systems, consumables and services. Packaging and color operations registered 3.5% core growth, benefiting from digital workflow solutions and color measurement equipment.
Adjusted operating profit increased 15.8% to $161 million, while the adjusted margin expanded 280 basis points to 28.2%. Operational improvements and savings from the Cost Optimization Program supported profitability.
Veralto's Adjusted Margins Benefit From Cost Savings
Adjusted operating profit increased 14.9% to $386 million. The adjusted operating margin expanded 170 basis points to 25.6%, reflecting operational improvements, cost optimization savings and tariff refunds.
Operational performance contributed approximately 130 basis points to margin expansion, while cost optimization savings added 40 basis points. Tariff refunds contributed another 30 basis points, partly offset by acquisition-related dilution of 20-30 basis points.
Adjusted gross margin increased 50 basis points to 60.6%. The quarter included $4.6 million in tariff refunds under the International Emergency Economic Powers Act, providing approximately 1 cent per share to adjusted earnings.
VLTO's Reported Profit Reflects Higher Expenses
Reported operating profit declined to $298 million from $326 million in the year-ago quarter. The reported operating margin contracted to 19.7% from 23.2%.
Third-quarter adjustments included $22 million in restructuring costs, $17 million in acquisition-related intangible amortization, $10 million associated with strategic initiatives and a $39 million reduction in a tax indemnification asset. Reported net earnings increased to $253 million from $239 million, while earnings rose to $1.03 from 95 cents.
Veralto's Cash Generation Supports Capital Deployment
Operating cash flow totaled $323 million compared with $270 million a year earlier. Capital expenditures were $19 million, resulting in free cash flow of $304 million, up 17.8% year over year.
Veralto ended the quarter with $1.79 billion in cash, gross debt of $2.92 billion and net debt of $1.14 billion. During the quarter, it acquired Alfaa UV, repurchased $89 million in shares and paid $32 million in dividends. The company also repaid $700 million in senior notes.
VLTO's Q4 & Full-Year 2026 Outlook
For the fourth quarter of 2026, Veralto expects core sales growth of 5.5-6.5% and an adjusted operating margin of approximately 24.5%. Adjusted earnings are projected between $1.13 and $1.16 per share. The Zacks Consensus Estimate of earnings for the same period is $1.13 per share.
For 2026, management raised its core sales growth forecast to 4.2-4.5% from 4-4.5%. Adjusted earnings guidance increased to $4.49-$4.52 from $4.35-$4.43, implying growth of 15-16%. The Zacks Consensus Estimate of earnings for the same period is $4.41 per share.
The company expects adjusted operating margin to expand by about 50 basis points and free cash flow conversion to exceed 105% of GAAP net earnings.
Veralto currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Earnings Snapshots
Trane Technologies plc (TT - Free Report) reported better-than-expected third-quarter 2026 results. TT’s earnings per share of $4.86 outpaced the Zacks Consensus Estimate by 2.5% and increased 25.3% from the year-ago quarter. TT’s revenues of $6.76 billion surpassed the consensus estimate by 5% and improved 17.7% year over year.
ManpowerGroup (MAN - Free Report) posted mixed third-quarter 2026 results. MAN’s earnings of $1.01 per share matched the consensus mark and rose 21.7% from the year-ago quarter. MAN’s total revenues of $4.84 billion missed the consensus mark by 1.4% but increased 4.4% year over year.