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Wednesday July 21, 2010
Veolia Environement (VE): A European bargain
by Yiannis Mostrous, contributing editor Personal Finance  Now is the ideal time to pick up shares of high-quality European companies; not only are valuations attractive at these levels, but earnings could also surprise to the upside in an environment where global growth remains strong.Once such top European bargain is water and waste-management firm Veolia Environment (VE). Europe accounted for three-quarters of Veolia's revenues in 2009, with France accounting for roughly half that total. 
But the company’s main business lines have relatively light exposure to economic cyclicality and may benefit from European austerity. For example, the company handles water and wastewater contracts in partnership with municipalities and government; such outsourcing deals are designed to cut costs and improve efficiency. The company’s waste-management business has weighed on growth because volumes declined during the 2008-09 recession, particularly at industrial customers. But management has cut costs, and the cyclical economic improvement will continue in Europe’s core economies--albeit at a slower pace. Veolia’s exposure to Asia-Pacific and other high-growth regions is small but expanding quickly. The firm has secured contracts in China, a country that has a growing need for clean water and better waste-management infrastructure in booming urban areas. Also, the company is involved in a major water desalination plant in the Middle East, a region that benefits from high energy prices. This is a top-notch firm with significant growth potential in emerging markets. Veolia Environnement yields 5 percent and is a bargain under 38. Learn more about this financial newsletter at Personal Finance. |
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