The Rise of Veralto: A Deep Dive into Its Bullish Market Trajectory

TipsForTraders | April 18, 2024

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Amid a general downturn where the majority of S&P 500 stocks are seeing lows, Veralto (VLTO) has emerged as a standout performer. On a notable Tuesday, while 267 stocks within the index hit new 20-day lows, VLTO distinguished itself by marking not only a new 20-day high but also achieving new 50-day, 52-week, and all-time highs. Originating from a spinoff from Danaher (DHR) last autumn, Veralto has established itself as a robust entity with annual sales reaching approximately $5 billion in 2024. The company operates through two main segments, water quality and product quality and innovation, and encompasses 13 operating companies.

Veralto’s stock performance has caught the attention of investors, particularly due to its technical chart patterns indicating a promising trajectory. The stock recently exited a bullish pattern marked in blue and is on the verge of triggering another bullish sequence highlighted in green. If Veralto sustains its position above these critical breakout zones, potential upside targets are pegged at $103 and $94 for the respective patterns. With its third earnings report as a public entity scheduled for April 23, the market anticipates volatility, yet the resilience of these bullish patterns will be crucial post-earnings.

Historically, despite a minor dip of 1.1% on the day of its first earnings report in October 2023, Veralto demonstrated a robust intra-day rally of over 6%. Similarly, in its February report, the stock experienced a gap up and advanced by 4.5%, continuing to rally in subsequent weeks. This early performance trend, albeit from a small sample size, suggests a potential for sustained growth.

Contrastingly, Danaher, Veralto’s parent company until last year, has not fared as well, remaining 40% below its 2021 peak and underperforming against both the S&P 500 and the industrials sector. Since its debut in late September, VLTO has appreciated nearly 13%, starkly outpacing DHR’s decline of nearly 3%. This divergence highlights Veralto’s successful independent trajectory in the market.

As Veralto continues to capitalize on favorable chart patterns and separates itself further from its former parent, DHR, investors are increasingly optimistic about its capacity for a sustained upward trend. The reliance on these bullish patterns is essential for Veralto’s narrative of growth and stability in the dynamic market landscape. This strategic leverage of technical indicators, combined with strong fundamental performance, suggests Veralto might indeed be gearing up for a prolonged period of success.