Tuesday, BMO Capital initiated coverage on Veralto Corp. (NYSE: VLTO) with an Outperform rating and a price target of $97.00. The firm highlighted the company's potential for solid earnings per share (EPS) growth in the coming years, citing recovery in its Water Quality and Product Quality & Innovation sectors as key drivers.
Veralto Corp. is recognized for its high-margin and high-return businesses, which, according to BMO Capital, are complemented by an impressive balance sheet and significant free cash flow (FCF). This financial strength is anticipated to support the company's strategic mergers and acquisitions (M&A), further bolstering its EPS growth.
The analyst noted that Veralto's stock price is not on the lower end, but this is a common characteristic among leading companies in the industry. Despite the current valuation, BMO Capital sees an attractive investment opportunity in Veralto, considering the company as a long-term growth story.
Veralto Corp. is set to benefit from its two main growth businesses, which are expected to recover and contribute to the company's performance. The firm's assessment suggests a positive outlook for Veralto, with the potential for double-digit EPS growth over the next two to three years.
The Outperform rating indicates that BMO Capital expects Veralto's stock performance to be better than the average return of the stocks the firm covers, within the context of the company's financials and market position. The price target of $97.00 reflects the firm's confidence in Veralto's ability to achieve and sustain growth in the foreseeable future.
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