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With a market cap of $26.8 billion, Waltham, Massachusetts-based Veralto Corporation (VLTO) provides advanced water analytics, treatment, marking, coding, packaging, and color management solutions. Operating through its Water Quality and Product Quality & Innovation segments, it serves industries like municipal utilities, food and beverage, and pharmaceuticals globally.
Shares of the water and product quality services provider have outperformed the broader market over the past 52 weeks. VLTO has climbed 45.8% over this time frame, while the broader S&P 500 Index ($SPX) has gained 32.6%. In 2024, VLTO stock surged 31.5%, compared to SPX's 26.5% YTD gain.
Looking closer, VLTO stock has also outpaced the Invesco Water Resources ETF's (PHO) 28.2% rise over the past 52 weeks and a 17.9% increase on a YTD basis.
Despite reporting better-than-expected Q3 adjusted earnings of $0.89 on Oct. 24, shares of VLTO fell 4.6% the next day due to cautious investor sentiment over the company's lowered full-year sales growth forecast, which was revised to low single digits. Additionally, the Q4 guidance for non-GAAP core sales growth in the low-to-mid single digits and adjusted earnings per share of $0.86 to $0.90 indicated limited near-term growth momentum. The market may have also reacted to skepticism about the sustainability of strong industrial water treatment demand amid an uneven recovery in consumer-packaged goods markets.
For the current fiscal year, ending in December, analysts expect VLTO's EPS to grow 9.1% year-over-year to $3.48. The company's earnings surprise history is promising. It beat the consensus estimates in the last four quarters.
Among the 13 analysts covering the stock, the consensus rating is a “Moderate Buy.” That’s based on six “Strong Buy” ratings and seven “Holds.”
On Oct. 25, RBC Capital raised Veralto's price target to $111 and maintained a “Sector Perform” rating, citing solid Q3 earnings with 4.5% organic growth, 63% increments, and 98% free cash flow conversion.
As of writing, VLTO is trading below the mean price target of $114.83. The Street-high price target of $125, implies a modest potential upside of 15.5% from the current price levels.
