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Estimates have been rising for Mobile TeleSystems (MBT - Snapshot Report) after the company reported its fourth quarter results on March 12.

It is a Zacks #2 Rank (Buy).

Based on current consensus estimates, analysts expect strong double-digit earnings per share growth over the next few years. On top of this, the company pays a dividend that yields a stellar 5.6%.

Valuation is attractive too, with shares sporting a PEG ratio of just 0.7.

Company Description

Mobile TeleSystems, or MTS, is the leading telecommunications provider in Russia, Eastern Europe and Central Asia. It provides mobile services to over 100 million subscribers.

The company is headquartered in Moscow, Russia and has a market cap of $18 billion.

Fourth Quarter Results

MTS reported its fourth quarter results on March 12. Revenue was down slightly year-over-year to $2.982 billion as growth in the mobile segment was more than offset by declines in fixed business revenues.

But operating income before depreciation and amortization (OIBDA) rose 10% over the same period as the OIBDA margin expanded 410 basis points to 42.8% of revenue.

Meanwhile, earnings per share came in at 40 cents, a penny shy of the Zacks Consensus Estimate.

Estimates Rising

Despite the slight earnings miss, analysts revised their estimates higher for both 2012 and 2013, sending the stock to a Zacks #2 Rank (Buy).

Management stated in its Q4 press release that growth would be limited in 2012 due to the macroeconomic environment. But the company still expects 5-7% top-line growth and an OIBDA margin between 40-42% for the year.

The Zacks Consensus Estimate for 2012 is now $1.69, representing 15% growth over 2011 EPS. The 2013 consensus estimate is currently $1.87, corresponding with 11% growth.

Juicy Yield

In addition to strong growth, the company offers a dividend that yields a stellar 5.6%.

The company pays an annual dividend based on net income, and for 2011 it paid out 72% of earnings. If earnings grow as expected, then look for that dividend to increase over the next few years.

Reasonable Valuation

The valuation picture looks attractive for this Zacks #2 Rank (Buy) stock. Shares trade at just 10x 12-month forward earnings and sport a PEG ratio of only 0.7.

It also trades at just 10x free cash flow, well below the industry median and its 10-year median.

The Bottom Line

With rising estimates, strong growth projections, a juicy 5.6% yield and reasonable valuation, Mobile TeleSystems offers investors attractive total return potential.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

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