Eyes Down For Vodafone Group plc results

It’s been a volatile year for Vodafone Group (LSE: VOD) (NASDAQ: VOD.US), with the price of the shares having peaked at over 250p in March before dropping back to the 220p level.

vodafoneThat still comfortably beats the FTSE 100 over the period, and there should be a dividend of around 5% coming. And over five years Vodafone is 80% up against less than 60% for the FTSE.

But what’s to come?

Results for the year ended March 2014 are due on Tuesday, 20 May. Current forecasts suggest a lacklustre year, with an 8% fall in earnings per share (EPS) on the cards — and there’s a further hefty 38% fall predicted for 2015.

First half slow

At the halfway stage to 30 September, we saw reported EPS down 2.6% to 7.85p after organic service revenues declined. But at least the dividend was confirmed, with a 3.53p interim announced and the company intending to pay a full-year total of 11p per share — at today’s price levels, that’s a yield of 5.0%.

General economic conditions were blamed for the slowdown, with chief executive Vittorio Colao saying

Whilst trading conditions in Europe remain very tough at present, we are encouraged by the forecast return to economic growth over the next two years and the potential for a shift in regulatory focus to support greater industry investment and consolidation

which hints at further takeovers and mergers in the future.

Tough times in Europe

vodThe somewhat gloomy outlook was confirmed by the time of Vodafone’s Q3 update, when we heard that organic service revenue for the quarter was down 4.8%, with Europe down 9.6% — although things were looking better in emerging markets, with a 13% rise in India.

And again, Mr Colao reminded us that in Europe “conditions are still difficult“, but he does apparently place great hope in the continuing shift to 4G and expects good things from video and other services.

Forecasts for 2014 are probably close to the truth, and we’ll most likely see them confirmed on the 20th, but with Vodafone shares trading on a forward P/E of 24 based on 2015 predictions, the price does not look like a bargain one to me.

Too expensive

The dividends are attractive, but Vodafone has dropped its previous commitments and now only aims to at least maintain the payout each year — and the City is expecting dividend growth to pause in 2016.

It looks like there’s a fair bit of merger/takeover premium built into the share price at the moment, and while that might pay off, investing in the hope of a takeover always seems like too much of a gamble to me.

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Alan does not own any shares in Vodafone.