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RBC raises Veralto price target, keeps rating

EditorAhmed Abdulazez Abdulkadir
Published 04/25/2024, 12:37 PM

On Thursday, RBC Capital Markets adjusted its financial outlook for Veralto Corp. (NYSE:VLTO), increasing the price target to $101 from the previous $99, while maintaining a Sector Perform rating on the company's stock.

The adjustment follows Veralto's first-quarter earnings report, which revealed a slight operating income beat with both of the company's segments showing growth. The consumables segment, accounting for approximately 60% of Veralto's revenue, reported a mid-single-digit percentage increase.

Veralto's management has indicated a recovery among Consumer Packaged Goods (CPG) customers, leading to a modest enhancement of the company's earnings per share (EPS) guidance for 2024 by 1.4%. However, the company has reiterated its guidance for low single-digit percentage growth.

Despite operating margins for 2024 trending towards the higher end of expectations, this suggests limited margin growth for the rest of the year once the impact of the Argentine Peso devaluation is excluded.

The company's performance has been solid, with an operating beat in the first quarter of 2024, driven by growth in both its segments. The consumables division, in particular, has shown resilience with a mid-single-digit percentage increase in sales. This segment's growth is significant as it represents a majority of Veralto's revenue.

Looking ahead, Veralto's management has maintained a cautious stance, indicating only a slight uplift in the 2024 EPS guidance and reaffirming the low single-digit growth forecast. This conservative outlook takes into account broader economic factors, such as the devaluation of the Argentine Peso, which poses a headwind to the company's financials.

Moreover, Veralto's prospects in the PFAS (per- and polyfluoroalkyl substances) market are being viewed with a long-term lens, with meaningful opportunities projected to materialize in the next three to five years. This timeline suggests that any significant financial impact from this sector is not expected in the immediate future.

InvestingPro Insights

Following RBC Capital Markets' update on Veralto Corp. (NYSE:VLTO), real-time data from InvestingPro further enriches the financial outlook of the company. Veralto's market capitalization stands at a robust $21.95 billion, and the company has demonstrated a strong gross profit margin of 58.31% over the last twelve months, indicating efficient management and a potentially sustainable competitive advantage. Additionally, the company's P/E ratio is currently at 29.02, with a slight adjustment to 27.45 when looking at the adjusted P/E for the last twelve months as of Q1 2024, which may attract investors searching for growth opportunities.

InvestingPro Tips highlight that Veralto operates with a moderate level of debt and has liquid assets that exceed short-term obligations, suggesting financial stability. The stock is also noted for its low price volatility, which can appeal to investors seeking a more stable equity in their portfolio. For those interested in a deeper analysis, there are additional InvestingPro Tips available, providing comprehensive insights into Veralto's financial health and market performance. Prospective investors can explore these tips and more by visiting https://www.investing.com/pro/VLTO and can enjoy an extra 10% off a yearly or biyearly Pro and Pro+ subscription with the coupon code PRONEWS24.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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