2015 has been a positive year thus far for investors in Vodafone (LSE: VOD) (NASDAQ: VOD.US), with shares in the mobile telecoms company rising by 8% since the turn of the year. Thats ahead of the FTSE 100s gain of 3% and a key reason for it is improving sentiment in the Eurozone. Certainly, the single currency region has a long way to go before it is back in full health, with the possibility of a Greek and British Exit over the next couple of years having the potential to push it into recession.
But, in recent months, sentiment towards the region has improved as a result of the commencement of the ECBs quantitative easing programme and, refreshingly, Vodafones considerable exposure to the region is not holding it back.
Looking ahead, there is a clear catalyst for share price increases. Vodafone is forecast to deliver much improved earnings numbers over the next two years, with growth of 16% being forecast for next year. Thats around twice the growth rate of the FTSE 100 and means that investor sentiment in Vodafone could improve sharply so long as the company can deliver on its optimistic guidance.
Furthermore, Vodafone also offers superb income prospects and, with an increase in interest rates unlikely for another year in the UK, investor demand for relatively stable dividend plays could rise. As such, Vodafones yield of 4.8% could also cause its appeal to increase, thereby acting as another catalyst for share price growth alongside the companys positive earnings outlook.
Clearly, Vodafone is the dominant stock in the mobile telecoms sector of the FTSE 350. In fact, there are few other stocks to choose from for investors seeking to gain exposure to the sector, with the only other large cap in this space being Inmarsat (LSE: ISA). However, its business is vastly different to that of Vodafone, with it being involved in the provision of global mobile satellite communication services rather than mobile phones and quad play, which is set to form an integral part of Vodafones future product offering.
Inmarsat, though, also has a bright future, with its bottom line forecast to rise by an impressive 19% next year. While this is good news for its investors, Inmarsat is expected to see its earnings fall by 10% in the current year, thereby leaving its net profit only around 7% higher in 2016 than it was in 2014. In contrast, Vodafone is due to see a fall of just 2% in its earnings this year which, while disappointing, is a distinct improvement on the last two years and should help to improve investor sentiment in the stock.
Meanwhile, Inmarsat also struggles to compete with Vodafone when it comes to income prospects. Thats because, while its yield is higher than that of the wider index at around 3.6%, it lags behind Vodafones far superior yield. And, while Inmarsats dividend is set to rise by 6.4% next year, it remains behind that of its larger sector peer.
So, while Inmarsat is set to have an upbeat 2016 and does offer an above average yield, Vodafones growth over the next two years looks likely to be ahead of it and its income return much higher than that of Inmarsat. As such, and with the Eurozone potentially through the worst of its unstable period, Vodafone appears to be the better buy at the present time.
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