Veralto Corporation

Veralto said total sales grew 7.6% year over year in Q2 2026, adjusted EPS increased 19.4%, and free cash flow was $328 million. Core sales rose 4.2%, with Water Quality up 5.7% and PQI up 2%. Management raised full-year adjusted EPS guidance to $4.35 to $4.43 per share, equal to 12% to 14% growth year over year, and expects second-half core sales growth of approximately 5% to 6%. They also guided to roughly 25 bps of margin expansion in Q3 and 25 to 50 bps for the full year.

Jennifer Honeycutt framed the quarter as strong execution across the portfolio and said growth is accelerating into the second half. She highlighted durable demand drivers in water, including data centers and water recycling/reuse, and in PQI, including digital workflow solutions, marking and coding, and product compliance. Her tone was confident and constructive, emphasizing long-term value creation through bolt-on M&A, share repurchases, VES-driven execution, and disciplined capital allocation.

Sameer Ralhan said the second-half core growth outlook of 5% to 6% should be led by volume, with pricing moderating slightly but still staying at or above the high end of the range. He guided to roughly 25 bps of margin expansion in Q3 and 25 to 50 bps for the full year, noting Q4 should see a stronger uplift, largely led by PQI. He also said the cost optimization program is on track, with only a few million dollars of benefit expected in Q4 and the bigger impact coming in 2027. On tariff refunds, he said Veralto received roughly $16 million total, with about $10 million in PQI and $6 million in Water Quality, and that no further refund benefit is included in second-half guidance, though another $0.02 per share could still be possible depending on timing.

Analysts focused on the sources of second-half acceleration, and management said growth should be broad-based rather than tied to one product line, with PQI supported by digital workflow bookings, easier marking-and-coding comps, and a recovery in packaging and color equipment. Questions on data center exposure drew a response that the business is still small at the company level, though ChemTreat is growing at strong double-digit rates in that niche. Management also addressed margin mechanics, saying IEEPA tariff refunds lifted adjusted operating margin by 110 basis points and that future refunds were not included in guidance. On M&A and partnerships, the company said its funnels are good, it is staying patient and disciplined, and it continues to pursue partnerships such as the one with Dow for liquid cooling applications.