On Friday, Citi maintained its Neutral rating on Veolia Environnement SA (VIE:FP) (OTC: OTC:VEOEY) stock with a price target of €29.90. The firm anticipates the company's upcoming third-quarter and nine-month financial report, which will include key figures such as EBITDA, EBIT, and group net debt.
The report is expected to reflect ongoing foreign exchange and scope challenges due to the depreciation of the Argentine peso, US dollar, and Brazilian real against the euro. Additionally, the divestment of Veolia's US sulfuric asset and its Morocco Lydec business is likely to impact reported numbers. Citi predicts that the trends observed in the second quarter, such as weather-related volume impacts, recyclate prices, synergies, and net efficiencies, will continue.
Veolia's cash position is expected to benefit from a €700 million inflow from divestitures during the quarter. This will be evident in the company's group net debt, which Citi estimates to be €18.9 billion. Despite these figures, the analyst does not foresee a significant effect on Veolia's share price following the report. Instead, the market's attention may turn to Veolia's growth strategy and potential mergers and acquisitions in the Hazardous waste and Water technology segments, aligning with the company's previous communications at their last Capital Markets Day.
In other recent news, Veolia Environnement SA has been the focus of significant developments. HSBC initiated coverage on Veolia, assigning a Buy rating, and highlighted the company's potential to capitalize on the growing emphasis on ecological concerns globally. The firm anticipates a compound annual growth rate (CAGR) in EBITDA of 5.0% and a net income CAGR of 9.2% for Veolia from 2023 to 2027.
Veolia reported strong financial results for the first half of 2024, demonstrating a revenue increase of 4.4% and an EBITDA growth of 5.7%. The company's GreenUp strategic plan, dedicated to ecological transformation and decarbonization, is driving growth and efficiency, with a goal of achieving a net income growth of 10% per annum and an ROCE above 9% by 2027.
The company showed robust performance in its Water Technologies and Hazardous Waste businesses, along with its North American, Middle Eastern, and Australian markets. Veolia is also ahead of schedule in realizing cost synergies from its Suez merger and is actively managing its portfolio through acquisitions and divestitures. However, energy activities declined by 14.5% due to energy prices and weather conditions. Despite macroeconomic challenges such as inflation and interest rates, the company has maintained revenue growth.
InvestingPro Insights
To complement Citi's analysis, InvestingPro data offers additional insights into Veolia Environnement's financial position. The company's market capitalization stands at $24.22 billion, with a P/E ratio of 20.38, suggesting investors are willing to pay a premium for its earnings. This aligns with an InvestingPro Tip indicating that Veolia is trading at a high P/E ratio relative to its near-term earnings growth.
Despite the challenges mentioned in the article, Veolia has demonstrated resilience. An InvestingPro Tip highlights that the company has maintained dividend payments for 24 consecutive years, which may appeal to income-focused investors. Additionally, with a current dividend yield of 3.06%, Veolia offers a steady income stream to shareholders.
The company's financial stability is further underscored by its profitability over the last twelve months, as noted in another InvestingPro Tip. This positive performance is reflected in Veolia's stock price, which is trading near its 52-week high, with a one-year price total return of 26.37%.
For investors seeking a deeper understanding of Veolia's prospects, InvestingPro offers 5 additional tips that could provide valuable context to the company's financial outlook and market position.
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