Italy’s economy is in rough shape, but it isn’t at the fiscal precipice that Greece, Ireland and Portugal find themselves. Indeed, there are many Italian companies with solid growth prospects that might interest investors with a hearty appetite for risk.
While it’s true the Italian economy has been below the euro zone average for more than a decade, and that Italy is the region’s largest borrower, the country has many positives going for it. For instance, Italian banks have weathered the economic downturn fairly well, thanks in part to prudent regulation. In fact, Bloomberg News reported that French banks are at the greatest risk from the Italian debt crisis.
Last week, Moody’s warned that it would cut Italy’s debt ratings because of structural weaknesses such as a rigid labor market.
Italian Prime Minister Silvio Berlusconi, who bares some of the blame for the country’s fiscal mess, pushed a $56 billion austerity plan through Parliament.
Pressure is also mounting on the deeply unpopular Berlusconi to resign, which is weighing down the stocks of many Italian companies and those with large footprints in Italy. The iShares MSCI Italy Index Fund (NYSE:EWI) has plunged more than 16% over the last three months. That’s worse than similar ETFs covering Spain, the iShares MSCI Spain Index Fund (NYSE:EWP), down 11.7% during that same time period.
Meanwhile, the FTSE Greek Index has dropped 5.5%, The iShares MSCI Ireland Capped Investable Market Index ETF (NYSE:EIRL) is off 5.9% while the FTSE Portugal Index is off 6.7%
Some Italian companies, though, appear to be weathering the downturn better than others, especially those that do plenty of business overseas. Here are some Italian companies for investors to consider adding to their portfolios.
Shares of luxury eyewear maker Luxottica (NYSE:LUX) have barely budged this year even though the company posted a 21% increase in first-quarter profit, thanks to the strength of its U.S. business, including Ray-Ban. About 60% of the company’s sales come from North America and the company has tripled sales in emerging markets over the past six years. The results surpassed Wall Street expectations. Analysts have an average target price for the U.S. shares of $35.61, ahead of the $31.40 level where it traded recently.
Wall Street also expects big things from Eni (NYSE:E), Italy’s largest energy company. U.S. shares have barely budged this year amid concerns about its business in Libya, which is in the midst of a civil war to oust dictator Muammar Gadaffi. Eni, though, is well diversified, with operations in 70 countries including the U.S. Analysts have an average target price of $57.50, on the company’s U.S. shares, ahead of the $44.07 where they recently traded.
Shares of Telecom Italia (NYSE:TI) are down more than 5% this year because of concerns about slowing growth in its home country. The company’s businesses in Brazil and Argentina both reported double-digit organic growth in the first quarter.
Analysts have an average target price of $16.41 on its U.S. shares, well ahead the $12.26 where they recently traded.
Luxury furniture maker Natuzzi (NYSE:NTZ) is betting on an aggressive expansion into the U.S. So far, shareholders think that it will pay off, boosting U.S. shares this year by more than 8%. The company’s products are sold in 123 markets in five continents. This stock is not closely followed by analysts and is thinly traded. Shares last traded hands at $3.55. One analyst has a price target of $6.50. Many other luxury Italian brands, such as Gucci, have done well in the current economic climate.
