Veralto Reports 3Q23 Results; Plans $0.09 Dividend For 4Q23

On October 26, 2023, Veralto Corporation (NYSE: VLTO, $70.00, Market Capitalization: $17.20 billion) reported 3Q23 results that surpassed consensus expectations. Total sales were $1.3 billion, an increase of 3.0% YoY (core sales +1.0% YoY), beating the consensus by 3.0%. The growth is mainly attributable to the Water Quality segments (+4.2% YoY), slightly offset by the Product Quality and Innovation (PQI, +1.0% YoY) segment due to the weak China market and softer demand in consumer-packed goods. Adjusted Operating profit was flat at $281.0 million (+6.0% above consensus) while the corresponding margin contracted 66 bps to 22.4%, mainly on higher separation cost. Adjusted EBITDA declined slightly by 0.3% YoY to $290.0 million, with a corresponding margin falling by 8 bps to 23.1%. Net Income was $205.0 million, declined 6.0% YoY, while it was above the consensus of $178.0 million. The corresponding margin contracted by 155 bps to 16.3%. Adjusted Diluted EPS came in at $0.75 (3Q22: $0.76) ahead of the consensus of $0.72.

In the near term, softer demand in China are anticipated to continue, coupled with weakness in volume growth in the global consumer packaged goods sector. Despite these short-term difficulties, management is confident in the resilient growth in the long term for both Water Quality and PQI. For FY23, core sales growth is anticipated to be low-single-digit (LSD) YoY, with mid-single-digit growth in Water Quality and a low-single-digit decline in PQI. Adjusted EPS is anticipated to be $3.11 to $3.16 per share, assuming an effective tax rate of 25.0%. Diluted shares outstanding are expected to be 247.0 million.