Cellcom Israel, Ltd. (CEL) provides cellular telephone services in Israel. It offers basic and advanced cellular telephone services, text and multimedia messaging services, and advanced cellular content and data services. The company’s basic cellular telephony services include voice mail, cellular fax, call waiting, call forwarding, caller identification, conference calling, Push-and-Talk, Talk 2, additional number, collect call, and outbound and inbound roaming services.

In mid-May, the company said that its first-quarter earnings rose, helped by an increase in subscribers, airtime usage and revenue from content services. Earnings per share came in at 78 cents, a full 39.3% ahead of the consensus estimate. Revenue for the quarter rose 10.9%.

At the end of March the company had 3.096 million subscribers, having added 23,000 net new subscribers in the quarter. It added 104,000 net new subscribers to its third generation (3G) network, reaching 523,000.

We think the fundamentals of the stock are extremely strong. Over the past month, this year’s earnings estimates have increased 22 cents to $2.63 per share. Two of the four covering analysts raised their forecasts. Additionally, we think the solid 8.6% dividend yield will satisfy income-seeking investors. The company’s net profit margin of 15% blows away the industry average. Management clearly knows what it is doing here. We see the stock at $42 within a year.

Suggested Stop: $32.91

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