Veralto VLTO reported impressive second-quarter 2026 results, with both earnings and revenues beating the Zacks Consensus Estimate.
VLTO’s adjusted earnings of $1.11 per share topped the Zacks Consensus Estimate by 11% and increased 19.4% from the year-ago quarter, aided by core sales growth, operating execution and tariff refunds.
Veralto Corporation Price, Consensus and EPS Surprise
Veralto Corporation price-consensus-eps-surprise-chart | Veralto Corporation Quote
Sales of $1.47 billion surpassed the consensus estimate by 2.5% and rose 7.6% year over year. Core sales grew 4.2%, led by Water Quality growth of 5.7%, while acquisitions and currency movements also supported the top line.
VLTO’s shares have dipped 6.9% over the past year compared with the industry’s 9.3% decline. The Zacks S&P 500 composite has risen 18.7% over the same time frame.
VLTO's Pricing and Volume Support Core Growth
Core sales growth reflected a 3% contribution from pricing and a 1.2% increase in volume. Acquisitions added 2.4% to reported growth, driven mainly by In-Situ in Water Quality and GlobalVision in Product Quality and Innovation.
Foreign-currency movements provided a 1 percentage point benefit. Recurring revenues grew at a high-single-digit rate and represented 62% of total sales, while non-recurring revenues advanced at a mid-single-digit pace.
Veralto's Water Quality Segment Leads Results
Water Quality sales increased 10.1% year over year to $908 million. Core sales rose 5.7%, acquisitions contributed 3.2% and favorable currency translation added 1.2%. Price and volume contributed 2.9% and 2.8%, respectively.
Chemical water treatment solutions delivered 10.7% core growth, supported by broad-based industrial demand. The segment recorded double-digit growth across data centers, chemical processing, oil and gas and food and beverage markets. Adjusted operating profit increased 12.6% to $241 million, while the margin expanded 60 basis points to 26.5%.
VLTO's Product Quality Business Posts Modest Growth
Product Quality and Innovation sales rose 3.8% to $566 million. Core sales increased 2%, acquisitions added 1.2% and currency provided a 0.6 percentage point benefit. Pricing contributed 3%, partly offset by a 1% volume decline.
Marking and coding core sales grew 3.5%, with gains across equipment, consumables and services. However, lower sales of color-testing and packaging-inspection equipment weighed on packaging and color operations. Adjusted operating profit advanced 8.6% to $152 million and the adjusted margin increased 130 basis points to 26.9%.
Veralto's Margins Benefit From Tariff Refunds
Adjusted operating profit increased 11.7% to $363 million. The adjusted operating margin expanded 90 basis points to 24.6%, while the adjusted gross margin improved 160 basis points to 61.6%.
Refunds tied to tariffs previously collected under the International Emergency Economic Powers Act contributed 5 cents per share to adjusted earnings. They accounted for 110 basis points of gross-margin expansion, while price and volume leverage added another 50 basis points. Excluding the refunds, the underlying business generated 14% adjusted earnings growth.
VLTO's Reported Profit Reflects Restructuring Costs
Reported operating profit was $315 million, up from $313 million in the year-ago quarter. The reported operating margin contracted to 21.4% from 22.8%, reflecting restructuring charges and other adjustments.
Second-quarter costs included $29 million related to Veralto's 2026 Cost Optimization Program, $17 million of acquisition-related intangible amortization and $2 million associated with strategic initiatives. Reported net earnings increased to $241 million from $222 million, while diluted earnings rose to 98 cents from 89 cents.
Veralto's Cash Generation Supports Capital Deployment
Operating cash flow totaled $340 million, compared with $339 million a year earlier. Capital expenditures were $12 million, resulting in free cash flow of $328 million and a conversion rate of 136% of net earnings.
Veralto ended the quarter with $2.12 billion in cash, gross debt of $3.38 billion and net debt of $1.26 billion. During the quarter, it spent about $195 million to acquire GlobalVision, allocated $134 million to share repurchases and paid $32 million in dividends.
VLTO’s Q3 & Full-Year 2026 Outlook
For the third quarter of 2026, Veralto expects core sales growth of 4-5% and adjusted operating margin expansion of approximately 25 basis points.
Adjusted earnings are projected between $1.06 and $1.09 per share. The Zacks Consensus Estimate for the same is pegged at $1.00 per share.
For 2026, management raised its core sales growth forecast to 4-4.5% from 3-4.5%. Adjusted earnings guidance increased to $4.35-$4.43 from $4.20-$4.28, implying growth of 12% to 14%. The Zacks Consensus Estimate for the same is pegged at $4.24 per share.
The company expects adjusted operating margin expansion of 25-50 basis points and free cash flow conversion above 100% 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
WEX Inc. WEX reported better-than-expected second-quarter 2026 results. WEX’s adjusted earnings of $5.35 per share outpaced the Zacks Consensus Estimate by 5.3% and increased 35.4% from the year-ago quarter. WEX’s revenues of $753.5 million topped the consensus estimate by 1.8% and improved 14.2% year over year.
Waste Connections, Inc. WCN posted impressive second-quarter 2026 results. WCN’s adjusted earnings of $1.50 per share outpaced the consensus mark by 11.1% and rose 16.3% from the year-ago quarter. WCN’s total revenues of $2.56 billion surpassed the consensus mark by 1.1% and increased 6.4% year over year.
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