MasterCard Earnings: What to Expect

NEW YORK (TheStreet) -- MasterCard(MA) is expected to beat analyst estimates when it reports first quarter earnings after Tuesday morning.

Analysts polled by Thomson Reuters expect MasterCard report $4.09 per share on sales of $1.5 billion.

"We could see a little bit of upside to analyst expectations," said David Koning, a Robert W. Baird analyst. "There will be benefits from the credit environment, currency and stock buybacks. Buybacks could add about a quarter onto earnings."

The credit environment has improved and analysts expect MasterCard's sales to be up both nationally and internationally. Processed transactions globally grew 11 percent in February compared to 9 percent in January, and in the U.S. they grew four percent in February compared to one percent in January, according to Goldman Sach's(GS) analyst Julio Quinteros. He expects an EPS of $4.20 and revenues of $1.47 billion.

Quinteros adds that cross boarder trends, credit growth and the completed acquisition of Travelex will also boost earnings and management has stated that it expects the acquisition to be accretive in 2012.

In addition, the DataCash acquisition will boost earnings in the first quarter, according to Deutsche Bank(DB) analyst Christopher Mammone, who predicts revenues of $1.4 billion and an EPS of $4.14.

"We expect payments volume growth of 11 percent to $527 billion," said Mammone. "Our full year estimates are consistant with guidance."

In the first quarter MasterCard has repurchased 3.18 million shares for a cost of $788 million, which is a, "reasonably aggressive buyback strategy," said Koning.

Buybacks are being completed and the stock is still being traded at a discount, according to Mammone. MasterCard shares are trading at $277.06, which is 15.5 times the price to earnings multiple of its 2006 IPO. When first listed, MasterCard shares were trading at 20.6 times the price to earnings.

"We think the market still too-harshly discounts future growth potential and overestimates risks associated with the new regulations," Mammone said.

Koning believes that MasterCard will have an upside over Visa(V) due to uncertainty about the Durbin Amendment, the debit interchange amendment that is being discussed and finalized and approved by July.