Which Way Will Vodafone Go for Growth?

Next Tuesday, Vodafone will release its latest financial results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise.

Vodafone has an extensive worldwide network of telecom services that covers countries across the globe. But the asset that has gotten the most attention lately has been the 45% stake it has in the Verizon Wireless joint venture with Verizon Communications . Let's take an early look at what's been happening with Vodafone recently and what we're likely to see in its report.

Stats on Vodafone

Analyst EPS Estimate For Year

$2.46

Change From Previous-Year EPS

2.9%

Revenue Estimate For Year

$69.83 billion

Change From Previous-Year Revenue

(6%)


Source: Yahoo! Finance.

How can Vodafone keep earnings growing?
In recent months, analysts have very modestly marked down their views on Vodafone's earnings, cutting $0.01 from their fiscal 2013 estimates and $0.03 from their consensus on fiscal 2014. The stock, though, has done well, rising about 11% since mid-February.

The big news for Vodafone over the past several months has come from speculation that Verizon will make a massive offer to buy out Vodafone's 45% stake in Verizon Wireless. Yet many recent reports suggest that the companies are far apart in valuing the stake, with a $30 billion gap between what Verizon is likely to offer and what Vodafone sees as a fair valuation. Moreover, high-profile Vodafone investors would prefer to see a deal that provides for the purchase of the entire company rather than simply cherry-picking its most lucrative asset. That would likely require a joint effort from AT&T , which might be more interested than Verizon in Vodafone's international assets. AT&T has been looking for ways to boost its growth, but with the U.S. market nearly saturated, overseas prospects appear more promising as a place for expansion.

The problem with getting rid of Verizon Wireless, though, is that it has provided huge amounts of cash flow to Vodafone lately. Just earlier this week, the joint venture agreed to distribute $7 billion to its owners, sending $3.15 billion Vodafone's way. A big one-time payoff would simply present Vodafone with the challenge of how to put all that money to work.

But Vodafone hasn't given up on its other businesses. Yesterday, the company announced an agreement with Deutsche Telekom that will let Vodafone offer high-speed Internet and video services in Germany. Even as Europe has struggled, it remains a potential growth market if the eurozone can get past its economic crisis and recover. In addition, emerging markets have remained a lucrative source of potential growth, although even there, slowdowns in India and South Africa have hampered progress.

In Vodafone's report, watch closely for signs of any progress in dealing with Verizon. With all eyes focused squarely on an eventual deal, Vodafone will have trouble moving past the issue until it's resolved once and for all.

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The article Which Way Will Vodafone Go for Growth? originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Vodafone. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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