Why MasterCard and Visa Are Both Earnings Winners

Banking, finance, and taxes

Published: January 30, 2015 9:20 am

Last Updated: January 30, 2015 9:22 am

Before markets opened Friday morning, MasterCard Inc. (NYSE: MA) reported its fourth-quarter results as $0.69 in earnings per share (EPS) and $2.42 billion in revenue. That was against Thomson Reuters consensus estimates of $0.67 in EPS and $2.39 billion in revenue. In the fourth quarter from the previous year, the company posted $0.57 in EPS and $2.13 billion in revenue.

During the fourth quarter of 2014, MasterCard repurchased approximately 2.1 million shares of Class A common stock at a cost of approximately $155 million.

In the fourth quarter, total operating expenses increased 26%, or 29% on a currency adjusted basis, to $1.4 billion compared with the same period in the previous year. The primary driver of this quarter’s expense growth was an $87 million restructuring charge.

Ajay Banga, president and CEO of MasterCard, said:

Despite a mixed global economy, we delivered solid results for the quarter and for the full year in 2014. This year is off to a good start with several new wins, as well as renewals of some important customer agreements, with more in the pipeline. Looking ahead, we will continue to be at the forefront of our industry by driving payment innovation with solutions such as MasterPass, and by increasing electronic payments usage globally as demonstrated by our significant expanded acceptance footprint across Africa.

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Shares of MasterCard closed Thursday up 0.7% at $81.38. Following the release of the earnings report, shares were up 4% at $84.75 in premarket trading. The stock has a consensus analyst price target of $97.19 and a 52-week trading range of $68.68 to $89.87.

Visa Inc. (NYSE: V) delivered on its earnings report in more ways than one. The credit card processing giant reported earnings above estimates, but more importantly it also announced a four-for-one stock split. This likely will have big implications for the Dow Jones Industrial Average (DJIA), but we will wait for S&P Dow Jones Indices to confirm this due to Visa having three different stock classes: A, B and C shares.

The company’s first-quarter of fiscal 2015 was reported as having $1.6 billion in net income, an increase of 11% over the prior year. Its EPS rose 15% to $2.53. Thomson Reuters had a consensus estimate of $2.49 per share.

ALSO READ: The Bullish and Bearish Case for Visa in 2015

Visa shares closed Thursday up less than 1% at $248.00. In after-hours trading shares were up 3% at $256.05. The stock has a consensus analyst price target of $285.78 and a 52-week trading range of $194.84 to $269.32.

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Flywheel Publishing has partnered with CardRatings to provide coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.