Veralto (NYSE:VLTO) executives highlighted what they described as a strong finish to 2025 and laid out expectations for another year of core sales growth and margin expansion in 2026, emphasizing steady demand across key end markets tied to clean water, safe food, and essential goods.
2025 performance and capital returns
President and CEO Jennifer Honeycutt said the company ended 2025 with a “strong fourth quarter,” crediting operational execution across procurement, supply chain, and factory teams. Honeycutt noted that during the year Veralto replicated and regionalized more than a dozen production lines into existing locations to improve flexibility and customer service, paired with “targeted supply chain and strategic pricing actions” to navigate a dynamic macro environment.
Honeycutt also pointed to shareholder-return actions, including a $750 million share repurchase program and an 18% increase in the dividend.
Regional and end-market demand trends
Honeycutt described 2025 growth as broad-based across regions and verticals. In North America and Western Europe—about 70% of revenue—core sales grew 5.3% and 3.8%, respectively, while high-growth markets rose 5.1% year-over-year. She said North America saw mid-single-digit growth in chemical water treatment solutions, with the highest industrial growth in chemical processing, power generation, mining, and data centers. She added that North American UV water treatment grew just under 10%, driven largely by municipal water reuse efforts.
In PQI, Honeycutt said North America delivered 5.8% core sales growth with mid-single-digit gains across packaging and color and marking and coding. In marking and coding, she noted mid-single-digit core sales growth for both consumables and equipment, with equipment gains in inkjet and laser product lines, supported by new product launches and market penetration across more substrates.
In Western Europe, Honeycutt said core sales grew 3.8% year-over-year, with Water Quality up 4% and PQI up 3.6%. She attributed Water Quality growth to traction from growth initiatives and changes to commercial architecture implemented in 2024 that improved lead generation and funnel management. In high-growth markets, she said results were led by Latin America, India, and the Middle East, while China posted modest growth led by PQI.
Innovation, portfolio actions, and the In-Situ acquisition
Honeycutt said Veralto’s increased R&D investment and focus on higher-return product opportunities helped drive several product launches over the last 12–18 months. She cited examples including a new ammonia analyzer in Water Quality, double-digit growth in single-use Chemkeys testing technology, a new UV laser marking and coding system in PQI designed to support sustainable flexible film packaging, and an AI-enabled packaging and color software solution to reduce errors during packaging print design.
She also outlined portfolio reshaping moves: Veralto divested the AVT product line within PQI at the outset of 2025, while TraceGains grew sales more than 20% in its first full year under Veralto. In Water Quality, the company acquired Aquafides in the second quarter, which she said complements TrojanUV by adding low-flow UV water treatment solutions and expanding presence in Europe.
At the start of 2026, Veralto completed the acquisition of In-Situ. Honeycutt said the deal expands Veralto’s water analytics portfolio into environmental water and hydrology markets and complements the OTT HydroMet business. She described In-Situ as a global leader in water measurement and monitoring, offering sensors, sondes, and data management solutions. Honeycutt said In-Situ averaged roughly 8% core sales growth over the past three years and delivered approximately $80 million in 2025 sales, with gross margins around 50% and EBITDA margins in the mid-teens.
On integration, Honeycutt told analysts Veralto is initially most focused on top-line synergies, arguing the combined In-Situ (water quality analytics in environmental water) and OTT (water quantity level and flow) portfolios are complementary. She said Veralto believes it can lift In-Situ’s growth to “low double digits” by combining portfolios and leveraging OTT’s channels outside the U.S., including Europe, Latin America, and Asia, while also applying the Veralto Enterprise System (VES) to improve operational and commercial execution.
Fourth-quarter results: pricing-driven core growth and margin expansion
CFO Sameer Ralhan reported fourth-quarter sales rose 3.8% to nearly $1.4 billion, including a 250 basis point currency tailwind. Core sales grew 1.6%, driven primarily by price up 2.3%. Volumes dipped modestly, which Ralhan attributed largely to three fewer shipping days versus the prior year, a roughly 260 basis point impact. He said underlying demand remained steady in both segments.
Fourth-quarter gross profit increased 3.4% to $828 million, with a 59.3% gross margin. Adjusted operating profit rose 7%, and adjusted operating margin improved 80 basis points to 24.6%, with profitability gains in both segments. Adjusted EPS increased 9% to $1.04. Veralto generated $291 million of free cash flow in the quarter, representing 115% conversion of GAAP net income.
In Water Quality, fourth-quarter sales grew 4.3% to $846 million, with core sales up 1.4% led by price. Adjusted operating margin increased 40 basis points to 25.9%. For the full year, Ralhan said Water Quality delivered 4.7% core sales growth and 80 basis points of adjusted operating margin improvement, reaching all-time highs in annual sales and adjusted operating profit.
In PQI, fourth-quarter sales grew 3% to $550 million, with core sales up 1.8% and price up 3%. PQI adjusted operating margin improved 160 basis points to 26.5%. For the full year, Ralhan said PQI delivered 4.8% core sales growth and a 26.5% adjusted operating margin, reflecting investments in TraceGains and efforts to diversify regional production.
2026 guidance: steady demand assumptions and In-Situ impact
For 2026, management guided to low- to mid-single-digit core sales growth and mid- to high-single-digit total sales growth. Ralhan said the outlook assumes a 100–150 basis point currency tailwind (based on December 31 rates) and 150 basis points of contribution from acquisitions net of divestitures, primarily In-Situ.
Veralto expects approximately 25 basis points of adjusted operating margin expansion, which Ralhan said includes 50 basis points of improvement in the core business offset by about 25 basis points of dilution from In-Situ. The company guided to adjusted EPS of $4.10 to $4.20 and free cash flow conversion of approximately 100% of GAAP net income, with capex of 1% to 1.5% of sales and modest working capital investment to support growth.
For the first quarter, guidance calls for core sales ranging from flat to up low-single digits and total sales in the mid- to high-single digits, with a 3.5% currency tailwind and about 50 basis points from acquisitions net of divestitures. Ralhan noted first-quarter 2025 core sales growth of 7.8% creates a difficult comparison, and said the first-quarter 2026 outlook implies a two-year core sales “stack” of about 4% to 5%. First-quarter adjusted operating margin is expected to be approximately 24.5%, with adjusted EPS of $0.97 to $1.01.
On the earnings growth outlook relative to prior years, Ralhan told analysts that the company’s adjusted EPS guidance incorporates In-Situ’s expected $0.02 per share operating earnings accretion, offset by about $0.04 of dilution tied to lower interest income from using cash to fund the acquisition.
In Q&A, Honeycutt reiterated that Veralto sees steady demand across both municipal and industrial water markets and said the company is “relatively insulated” from municipal capex cycles because a majority of revenue is recurring and tied to critical customer processes. She also said data center exposure remains “relatively small” and is not expected to be a meaningful contributor to 2026 core growth, though she noted the broader data center ecosystem—such as power, cooling, mining, and semiconductors—adds up. She added that liquid cooling increases the need for precision monitoring and chemical control, benefiting multiple Veralto businesses.
About Veralto (NYSE:VLTO)
Veralto Corporation provides water analytics, water treatment, marking and coding, and packaging and color services worldwide. It operates through two segments, Water Quality (WQ) and Product Quality & Innovation (PQI). The WQ segment offers precision instrumentation and water treatment technologies to measure, analyze, and treat water in residential, commercial, municipal, industrial, research, and natural resource applications through the Hach, Trojan Technologies, and ChemTreat brands. This segment provides water solutions, including chemical reagents, services, and digital solutions.
