Veralto (NYSE:VLTO) reported third-quarter 2026 results marked by sales growth, higher adjusted earnings and continued free-cash-flow generation, while raising its full-year adjusted EPS outlook.
President and Chief Executive Officer Jennifer Honeycutt said total sales increased 7.5% year over year in the quarter, while adjusted EPS rose 19.2%. The company generated $304 million of free cash flow. Core sales grew 5.1%, led by 6.4% growth in the Water Quality segment and 3.2% growth in Product Quality & Innovation, or PQI.
Honeycutt said both segments accelerated their core-sales growth sequentially from the second quarter, with demand remaining healthy across the portfolio. For the fourth quarter, Veralto expects core sales growth of 5.5% to 6.5%, plus approximately 5% growth from acquisitions, implying total sales growth of about 10% to 11%.
The company raised its full-year adjusted EPS guidance to $4.49 to $4.52, representing growth of 15% to 16% from the prior year. Honeycutt attributed the outlook in part to third-quarter performance, the fourth-quarter forecast and early contributions from the company’s Cost Optimization Program.
Water Quality demand supported by recurring revenue and new products
Honeycutt said Water Quality has a balanced mix of municipal and industrial customers, with industrial applications representing about 50% of segment sales. She noted that about 60% of Water Quality revenue is recurring, supported by consumables and services that are essential to customers’ operations.
While portions of the business involve equipment sales, Honeycutt said those purchases generally relate to operational capital expenditures, such as facility upgrades and optimization, rather than infrastructure projects that are more sensitive to federal-funding changes.
Management cited water scarcity, recycling and reclamation needs, and severe weather events as secular drivers for demand. Honeycutt also highlighted momentum in municipal markets, where Hach has introduced a flagship spectrophotometer as well as new ammonia and phosphate analyzers. She said commercial execution, product-development activity and Veralto’s operating discipline have supported growth in the municipal business.
Chief Financial Officer Sameer Ralhan said the company is seeing inflation in certain inputs, including oil-derived materials, transportation and memory products used in instrumentation. However, he said procurement and business teams have helped offset those pressures through the company’s Veralto Enterprise System, or VES, execution framework.
Regionally, Honeycutt said China’s municipal spending remains subdued, and Veralto is not expecting a significant change in that market. China accounts for about 6% of company sales, she said. In Latin America, Water Quality sales were down modestly from the prior year but improved sequentially, with some project timing affected by election-related uncertainty in Brazil.
Data centers and treatment acquisitions expand water exposure
Veralto said its current data-center revenue base remains small, although data-center sales doubled in the third quarter. Honeycutt said demand spans both water treatment and analytics, with ChemTreat participating early in data-center projects through consultation on water-treatment design and balancing water and power efficiency.
Ralhan characterized the treatment opportunity as largely an annuity-style business once data centers are operating. Honeycutt said Veralto has opportunities in utility-water applications and increasingly in liquid direct-to-chip cooling, where the company provides chemical solutions and services. Ralhan also referenced a partnership with Dow related to glycol.
The company has deployed more than $1.65 billion year to date across four bolt-on acquisitions and share repurchases. That activity includes the acquisition of Cleanwater1, which Veralto said expands its water-treatment capabilities. The company also acquired In-Situ, AQUAFIDES and Alfaa UV.
Ralhan said In-Situ has had a strong start and that commercial synergies are running ahead of the assumptions used to underwrite the transaction. AQUAFIDES is also contributing solidly, he said, while Alfaa UV and Cleanwater1 are in the early stages of integration. Honeycutt described the acquired water-treatment assets as high-single-digit to low-double-digit growers positioned in higher-value portions of the treatment process.
PQI expected to accelerate in fourth quarter
PQI growth is expected to move toward the high end of Veralto’s fourth-quarter core-sales guidance range, according to Ralhan. Management cited continued demand in digital workflow solutions, steady marking-and-coding demand and a recovery in color-measurement instruments.
Honeycutt said digital workflow demand is being supported by the integration of the TraceGains and GlobalVision acquisitions into Esko’s digital backbone. Because revenue from software-as-a-service contracts is recognized over time, Ralhan said the business provides good visibility over the near term.
The company also cited an improved order book and stronger service growth exiting the third quarter in its color-measurement business, though Ralhan noted that easier comparisons are supporting fourth-quarter growth in that area. In Western Europe, Honeycutt said PQI posted low-single-digit growth, with marking and coding flat as consumables growth was offset by modestly lower equipment sales tied to customer-spending timing.
Cost program and capital allocation
Veralto expects its Cost Optimization Program to generate $10 million to $15 million of savings in 2026. Ralhan said the program remains on track to deliver roughly half of its savings by the end of 2027 and reach its full run rate in 2028. The initiative focuses on simplifying business processes, optimizing functional costs and investing in technology and process improvements.
For the fourth quarter, Ralhan said Veralto expects 30% to 35% incremental fall-through, or roughly 30 basis points of year-over-year margin expansion. Cost-program benefits are expected to add about 40 basis points, though those gains are largely offset by the Cleanwater1 acquisition and investments intended to support 2027 initiatives.
Veralto has repurchased $550 million of stock under its $750 million authorization when including October activity, Ralhan said. He said the company will remain opportunistic with buybacks while maintaining a balanced capital-allocation strategy that includes acquisitions. Management described M&A pipelines in both business segments as active, encompassing smaller bolt-ons, larger assets, technology opportunities and geographic expansion possibilities.
About Veralto (NYSE:VLTO)
Veralto Corporation (NYSE: VLTO) is a global provider of technology, products and services that help customers manage water quality and improve the quality, safety and efficiency of packaged goods. The company serves municipal, industrial, commercial and consumer-facing markets through a portfolio of operating businesses.
Veralto’s Water Quality segment provides instruments, software and services used to test, monitor and treat water and wastewater. Its brands include Hach, Trojan Technologies and ChemTreat, which support applications such as laboratory and field testing, disinfection, water treatment and industrial water management.
The company’s Product Quality & Innovation segment supplies technologies used in product identification, packaging design, color management and quality inspection.
