Justice Sirikah

Shares of Valeo (PinkSheets: VLEEY) Rallies to a New 52 Week High on Forecast Upgrade

by Justice Sirikah December 17, 2009
vleey.jpgThe stock price of French tier 1 supplier Valeo (PinkSheets: VLEEY) took a giant leap forward on the market and is currently basking in the glory of a new 52 week high, thanks to the publication of the company’s upgrade of fourth quarter sales growth target on year-over-year basis. The auto parts maker stated that the recalculation had been inspired by the mending global car markets, particularly in Asia, and the exceptional success of the vehicle scrapping schemes in Europe.

  For the three months ending December 31, Valeo said it is now looking to a sales increase of 17 percent from last year, overshooting the firm’s previous expectation of 6.8 percent. In addition, the company maintained its last month’s estimate of substantial improvement in the fourth quarter operating margin while it also said free cash flow after restructuring expenses for the full year 2009 should pick up further. According to the company, this is a sign that its fixed-cost reduction programme had a positive influence over the three months in progress.

  Overall, the self-assured outlook stresses the resurgence of tier 1 suppliers half-way into the current year, having previously trimmed back inventories as traffic decreased in the automakers’ showrooms as a result of the global recession. Recent reports noted that the European Automobile Manufacturers Association recently acknowledged a 27 percent increase in the continent’s November new car registrations over the same period last year.

  The third quarter marked a surprise spring to black for Valeo following three consecutive quarters in the red. The company managed to generate revenues of $2.75 billion, 3.5 percent better that $2.66 billion recorded for the quarter before. However, compared to the same period of last year, the third quarter figure reflected an eight percent drop off from $2.99 billion. Q3 operating margin also blew past expectations to $97.8 million, from Q2’s $21.5 million.

  The share price of Valeo closed December 17 trading at more than double its price for the same day in 2008, at $16.75. At the time of writing the stock had gained another 1.37 percent to $17.

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