Veolia Environnement SA and Consolidated Water Co. are excellent values for those looking to invest in the water utility industry, an analyst said Monday as the sector's shares mostly fell.
Year to date water utilities have slightly outperformed the Standard & Poor's 500 stock index, and they rose about 4 percent during last week's Wall Street rally after a string of positive earnings news, Brean, Murray, Carret & Co. analyst Michael Gaugler said in a note to clients.
Gaugler rates Veolia, a French company that recently inked a deal to run New London, Conn.'s water and wastewater system, as "Buy" with a $89 price target. The target implies be expects shares to rise about 27 percent over Friday's $69.96 close.
The New London deal reflects a growing trend for cash-strapped municipalities to sell off utilities. Wall Street generally sees water utilities as good long-term investments.
Water is the generally cheapest of all utilities, including power and natural gas.
During intraday trading, shares of Veolia trading in New York fell $1.32 to $68.64.
The drop comes after disappointing news from Bank of America that sent Wall Street down.
Gaugler rates Consolidated Water as "Buy" with a $35 price target, implying he expects the stock to jump more than 40 percent over Friday's $24.85 close.
The Cayman Islands-based company supplies water throughout the Caribbean region. Shares of Consolidated Water fell 22 cents to $24.63.
Elsewhere in the sector, shares of California Water Service Group fell 19 cents to $40.62, shares of American States Water Co. gained 4 cents to $38.50, shares of SJW Corp. lost 33 cents to $29.87 and shares of York Water Co. decreased 22 cents to $15.65.
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