Danaher's Spun-Off Company Veralto Can Grow Via M&A: Analyst

RBC Capital Markets analyst Deane Dray initiated coverage on Veralto Corp VLTO with a Sector Perform rating and a price target of $78.00.

Veralto separated from its former parent, Danaher Corp DHR, and began trading on the New York Stock Exchange in October.

Veralto deals in essential technology solutions and is bolstered by the organization's use of the Veralto Enterprise System (VES), a derivative of the Danaher Business System (DBS).

Last month, the company reported Q3 FY23 adjusted EPS of $0.75, beating the consensus of $0.70, and revenue of $1.255 billion exceeded the estimate of $1.205 billion. 

Veralto has +23% EBITDA margins, 57% razor/razor blade recurring revenues, and 60% water + 20%

food/drug defensive mix, the analyst notes.

It also ranks as an elite Prime according to the analyst's Investment Framework. However, having been continuously improved for the past 20 years by the vaunted DBS, Veralto is the opposite of a fixer-upper.

With few self-help prospects and a modest topline, it needs M&A to bolster growth, but with no obvious

takeout candidates, the analyst says.

The analyst cites Veralto as the spinout gem with scarcity but an element of show-me on growth.

Price Action: VLTO shares are trading higher by 0.85% at $70.88 on the last check Friday.