Veralto VLTO stock has gained 13.2% over the past three months against the industry’s 2% decline. The Zacks S&P 500 Composite has gained 5% during the same period.
Three-Month Share Price Performance
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Let us delve into the factors that contributed to the company’s outperformance.
Segment Results Pave the Way for Long-term Growth
Veralto is gaining momentum across both its Water Quality ("WQ") and Product Quality & Innovation ("PQI") segments. During the second quarter of 2026, WQ sales increased 10.1% year over year to $908 million, supported by double-digit growth across data centers, chemical processing, oil and gas and food and beverage markets. Adjusted operating profit rose 12.6% to $241 million, while margin expanded 60 basis points to 26.5%. PQI sales increased 3.8% to $566 million, with growth across equipment, consumables and services. Adjusted operating profit advanced 8.6% to $152 million and margin expanded 130 basis points to 26.9%. Broad-based demand, improving volumes and continued margin expansion across both segments should support stronger earnings growth and reinforce VLTO’s long-term growth trajectory.
Liquidity Provides Financial Flexibility
VLTO ended the second quarter of 2026 with $2.12 billion in cash, $3.38 billion in gross debt and $1.26 billion of net debt, with net leverage at 0.9 times. Free cash flow reached $328 million, equal to 136% of net earnings. Despite funding acquisitions, dividends and share repurchases, the company retains substantial balance-sheet capacity for further capital deployment. Management also raised free cash flow conversion guidance to more than 100% of GAAP net earnings. Sustained cash generation and low leverage should support continued investment in growth while preserving flexibility for acquisitions and shareholder returns.
Capital Returns Generate Shareholder Value
Veralto continues to return capital to shareholders while investing for growth. In the second quarter of 2026, the company paid $32 million in dividends and repurchased $134 million of shares. As of July 27, 2026, VLTO had repurchased more than five million shares for approximately $480 million, completing nearly two-thirds of its $750 million authorization. Continued buybacks and dividends provide a direct avenue for shareholder returns, while the remaining authorization offers additional capacity for capital returns if conditions remain favorable.
VLTO’s Zacks Rank & Stocks to Consider
Veralto currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A couple of better-ranked stocks in the broader Business Services sector are Bright Horizons Family Solutions Inc. BFAM and TrueBlue, Inc. TBI.
Bright Horizons Family Solutions carries a Zacks Rank #2 (Buy) at present. It has a long-term earnings growth expectation of 13.9%.
BFAM delivered a trailing four-quarter earnings surprise of 7.6%, on average.
TrueBlue carries a Zacks Rank #2 at present. It has a long-term earnings growth expectation of 14%.
TBI beat earnings estimates in three of the trailing four quarters and missed once, with an average surprise of 22.4%.
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Veralto Corporation (VLTO): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).