8 Reasons Why You Should Buy Telefonica (TEF) Stock Now

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On Sep 6, Spanish telecom giant, Telefonica S.A.TEF was upgraded by a notch to a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Big Beat in Second-Quarter 2017

Telefonica's performance in certain important metrics looks impressive in the last reported second-quarter 2017 results. Quarterly net income was €821 million (approximately $902 million), up 18.4% year over year. Moreover, second-quarter earnings per ADR (American Depository Receipt) came in at 16 cents, up 6.7% year over year. Total revenue amounted to at €12,960 million (roughly $14,241 million), up 1.9% year over year.

We believe that the impressive financial results came on the back of Telefonica's business strategies which included the launch of video services in several Latin-American markets, widespread adoption of broadband and data services, price revision, network enhancement, strategic collaborations and focus on organic growth and portfolio optimization.

The company continues to capitalize on opportunities prevalent in the digital market through several expansion strategies. The acquisition of E-Plus boosts Telefonica's position as the largest mobile service provider in Germany in terms of subscriber count. In Brazil, Telefonica operates through its subsidiary Telefonica Brasil SA VIV .

Moreover, the company's focus on increasing the weight of higher-value services so as to improve the quality of the Telefonica Group's customer base have resulted positively. This is evident from the increase in the average revenue per customer and churn reduction.

Hiked Guidance

For fiscal 2017, Telefonica has upgraded its guidance and reiterated the dividend announced for the year. The company expects revenues to grow more than 1.5% year over year. OIBDA margin will expand 0.01% and capital expenditure will be around 16% of the total revenue.

Price Performance

On a year-to-date basis, shares of Telefonica have increased 14.5% compared with the industry 's gain of 8.4%.

When compared with the market at large, the stock's performance looks favorable, as the S&P 500 index has gained 9.9% over the same time span.

Sales and EPS Estimates

Additionally, for 2017, sales growth is pegged at 3.7% while Earnings Per Share (EPS) is likely to grow 3.6%

Positive Earnings Surprise History

Telefonica delivered a four-quarter average earnings surprise of 75.00%.

A Broker Favorite

We note that earnings estimates for Telefonica have moved up in the past 60 days, reflecting optimistic outlook of analysts. The earnings estimate for full-year 2017 and 2018 has increased during the said time frame.

The Zacks Consensus Estimate of earnings for fiscal 2017 has jumped 4.9% to 86 cents per share. The estimate for 2018 has soared 4.3% to 96 cents.

Given the wealth of information at the disposal of brokers, it is in the best interest of investors to be guided by broker advice and the direction of their estimate revisions. The direction of estimate revisions serves as an important pointer when it comes to the price of a stock.

Other Key Picks

Other top-ranked stocks in the broader Utilities sector are TELUS Corporation TU and Telephone and Data Systems Inc. TDS . While TELUS sports a Zacks Rank #1, Telephone and Data Systems carries a Zacks Rank #2.

For 2017, EPS of TELUS and Telephone and Data Systems are projected to grow 7.7% and 8.8%, respectively.

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Telefonica SA (TEF): Free Stock Analysis Report

TELUS Corporation (TU): Free Stock Analysis Report

Telephone and Data Systems, Inc. (TDS): Free Stock Analysis Report

Telefonica Brasil S.A. (VIV): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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