MasterCard's Report Faces High Bar

Purchase, N.Y. (TheStreet) -- MasterCard(MA Quote) is set to report its third-quarter results before the opening bell on Tuesday, and the company's prospects continue to bode well as increasing numbers of consumers and businesses shift to plastic payments from cash.

But, following a strong report last week from rival Visa (V Quote) and the outperformance of MasterCard's stock in the past year, Wall Street is likely expecting an upside surprise.

The average estimate of analysts polled by Thomson Reuters is for a profit of $2.94 a share from MasterCard in the September quarter on $1.35 billion of revenue.

In the year-earlier quarter, the company lost $193.5 million, or $1.49 a share. Last year's results included a charge of $827.5 million ($515.5 million after taxes) related to an antitrust litigation settlement with Discover Financial Services (DFS Quote). Excluding the charge, MasterCard earned $2.47 a share in the year-ago period, besting the average analysts' view of $2.25 a share

Some indications about MasterCard's performance can likely be extrapolated from the numbers recently posted by Visa, which is nearly double the size of MasterCard. Based in San Francisco, Visa reported quarterly adjusted earnings of $552 million, or 74 cents per class A common share on Oct. 27, coming in 2 cents ahead of Wall Street's consensus view.

Visa's better than expected profit primarily came from continued growth in its debit business as well as its volume of processed transactions, factors that may not carry the same weight for MasterCard.

While neither company holds loans on its balance sheet, a fact that's allowed each to largely avoid the credit troubles of the last two years, both firms have been hit by reduced payments volumes, particularly in their U.S.-based credit card businesses. MasterCard, however, has been affected more than Visa because it relies more heavily on its credit card business. MasterCard is making headway in its debit business but it still has a long way to go to surpass Visa.