Vodafone tipped as 'strong buy' after results exceed expectations

15 May 2018

Telecoms provider Vodafone has been singled out as a “strong buy” buy for investors following the posting of positive financial results today.

The group has announced that operating profits are up 15.4% to €4.3 billion in the year to 31 March 2018.

As such, Richard Hunter, head of markets at investment platform Interactive Investor (Moneywise’s parent company), believes the future for Vodafone looks fruitful.

He explains: “On most metrics, the company has exceeded expectations, with another reduction in net operating costs and a strong hike in adjusted earnings pushing Vodafone back into the black. Pre-tax profits showed a 39% increase, while from an operational perspective broadband gains and strong data demand provided additional tailwinds. Even at the flagging India business, where revenues were down 19% due largely to intense competition, the announcement of the merger with Idea Cellular is not only timely but likely to be mutually beneficial.”

Mr Hunter does caution that shares have lost 2% over the last year compared to a 3.7% gain for the wider FTSE 100. In addition, new debt remains at a “significant level” and competition in the sector is “fierce”.

But overall, he believes the company is a “strong buy” for income-seeking investors. “Despite continued investment in the business, such as India and the Liberty Global Germany acquisition, Vodafone has again raised its dividend in view of its own confidence in prospects, and the current yield of 6.4% is a strong invitation to investors who are being paid handsomely to wait while the strategy unfolds.”

Only last June The Share Centre highlighted Vodafone its share of the week due to it being one of the fastest growing broadband providers in Europe.

At the time of writing on 15 May 2018, Vodafone was trading at 200p.

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