Despite a spike in volatility as the Russians brought the crisis in Ukraine to a head, so far the European recovery appears intact. Even Greece is continuing to improve, as that battered country plans its first long-term bond sale since being bailed out in May 2010.

According to its internal estimates, the European Union should see gross domestic product (GDP) of 1.5 percent this year and 2 percent in 2015. German GDP alone is expected to grow by 1.8 percent this year while France, Italy and Spain, all growing a bit slower, should also see their economies expand.

Unemployment is expected to remain a challenge in the region, especially in Italy where the rate is now at a record high of around 12 percent. But inflation remains subdued. Coupled with the slowly improving economy, low inflation should provide another boost to consumer confidence. In March, the region’s confidence reading posted its sharpest increase in five years as it hit 102.4, well above the market expectation of 101.4.

Other signs of recovery include hedge fund interest, as those sophisticated investors report high levels of European investment over the past few months. The International Air Transportation Association also reported that air freight in Europe grew by 5.5 percent in February, second only to growth in the Middle East.

While economic challenges are still lurking in Europe, such as high levels of sovereign debt, overall the economic recovery in the region appears to remain on track and gaining traction, making Europe one of the most attractive investment destinations of 2014.

Italian Toll Takers

Italy’s unemployment rate remains stubbornly high, but the country sold five-year bonds last week at their lowest ever yield of 1.88 percent, when just a month earlier the going yield was 2.14 percent. In a separate auction of 10-year bonds, yields fell month-over-month from 3.42 percent to 3.29 percent. More reforms will be required to keep the Italian economy on track; a liberalization of the labor market there would be particularly helpful. Nonetheless, the world clearly believes there’s little chance of a double-dip recession in the country.

These factors will continue driving revenue growth at Atlantia (OTC: ATASY), one of the largest global private toll road investors.

While the company’s operations are global in scope, its primary revenue generator is its Italian toll road concessions, which span more than 3,000 kilometers. Its largest Italian concession, on Autostrade per L’Italia, is responsible for more than 90 percent of the company’s Italian revenues and doesn’t expire until 2038.

The company also operates the country’s largest airport, Leonardo de Vinci-Fiumicino Airport, following its merger with Gemina last year, as well as Ciampino Airport, both in the area of Rome. It is responsible for another 2,000 kilometers of roadways primarily in Brazil, Chile, Poland and, through a subsidiary, the US. It is also in the process of building a toll road in India under a 50-50 partnership with the Tata Group.

Traffic on Atlantia’s Italian roadways declined by 1.6 percent in 2013 compared to the prior year, with passenger vehicle traffic down by 1.5 percent and freight traffic (vehicles with three or more axles) down by 2.4 percent. Still, total Italian revenue was essentially flat at EUR3.423 billion, as higher toll rates helped offset the traffic decline.

Overseas motorways experienced strong year-over-year revenue growth, up by 31.7 percent to EUR557.4 million, largely thanks to strong traffic on Brazilian and Chilean roadways, which was up 4.8 percent and 7.2 percent, respectively. Polish traffic also grew by 10.2 percent but made a smaller revenue contribution, though it did help push overall international traffic up by 5.9 percent.

While overall airport passenger traffic was down 1.3 percent year-over-year, total revenue was up 22.2 percent to EUR716 million due to increased aviation traffic.

Overall revenue for the company totaled EUR4.243 billion, a 5.2 percent year-over-year increase. Operating cash flow for the year grew by 10.3 percent to EUR1.663 billion, while operating profits were up 11.2 percent to EUR1.814 billion.

The company’s growth outlook for 2014 looks promising despite the ongoing challenges in Italy. Traffic on Italian roadways posted positive growth in the first three months of this year and airport traffic is highly dependent on the overall state of the economy.

As the Italian economy stabilizes and returns to growth along with the rest of Europe, both business and tourist travel rates will pick up. Atlantia will also enjoy lower borrowing costs this year thanks to a rating upgrade from Standard & Poor’s to BBB+ on Aeroporti di Roma’s credit.

With a strong growth outlook and an attractive yield of almost 3 percent, I’m adding Atlantia to our Long-Term Portfolio as a buy up to 19.

A Happier Consumer

Thanks to the improving European outlook, I’m reiterating my buy recommendation on Unilever NV (NYSE: UN).

One of the world’s largest consumer products companies, it reported its first year of slowing global sales growth since 2009 as growth slipped to 4.3 percent, down from 6.9 percent in 2012. Revenue for the year totaled EUR49.8 billion.

Slow growth in emerging markets and currency depreciation played a significant role in the slowdown, as did the fact that a more positive economic environment in the developed world had yet to translate into stronger sales. Underlying sales, which exclude currency movements, in emerging markets were up 8.4 percent, while those in the developed world declined by 1.7 percent, largely thanks to the stronger euro. But with the steadily improving growth outlook in Europe, we should see that developed world decline reverse course in 2014.

Despite last year’s drop in sales, net profit for 2013 was up 9 percent to EUR5.3 billion, while cost controls helped boost operating margin to 15.1 percent from 13.6 percent in 2013. Free cash flow of EUR3.9 billion amounts to 7.8 percent of last year’s sales. Earnings per share (EPS) came in at EUR1.58, up 3.1 percent from last year’s EUR1.53.

Given those shifting economic dynamics, I believe the current consensus forecast for 2014 EPS of EUR1.60 per is entirely too conservative and more likely to come in around EUR1.65. But after the seesaw in European growth over the past few years, I suspect most analysts are still a bit shy about their forecasts, preferring to come in under rather than over. The recent pickup in European consumer sentiment has yet to bleed through to earnings outlooks.

Moreover, because of the sheer size of Unilever’s global distribution network, the company should be able to find a way to eke out greater efficiencies, boosting margins and the bottom line.

Continue buying Unilever NV up 46.

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