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Stocks Hitting 52-Week Highs: Visa, MasterCard, Discover

NEW YORK ( TheStreet) -- Shares of credit card companies Visa (V - Get Report), Discover (DFS - Get Report) and MasterCard (MA - Get Report) reached 52-week highs Friday following MasterCard's fourth-quarter earnings on Thursday.

MasterCard reported fourth-quarter net income of $19 million, or 15 cents a share, including a special $495 million after-tax charge related to antitrust litigation the company as well as other credit card companies and banks will face. A year earlier, MasterCard earned $415 million, or $3.17 a share.
Discover, MasterCard and Visa stocks hit 52-week highs Friday.

Janney Capital Markets analyst Thomas McCrohan noted that Visa and Discover reaching 52-week highs was a "function of MasterCard's results." He added that MasterCard noted that the European consumer is spending, one area in which investors and analysts were concerned. Visa has less exposure to Europe than MasterCard, McCrohan said.

Another area of concern is the antitrust lawsuit that is hanging over credit card companies as well as other banks. MasterCard CEO Ajay Banga took a strong stance on the lawsuit and said during the earnings call, "I want to make clear that we would not agree to any significant or long-term reductions in MasterCard's credit interchange rate as part of any settlement."

McCrohan has a neutral rating on MasterCard and Visa because of the likelihood that these companies will have their multiples expand while the antitrust lawsuit is hanging over them. Otherwise, he's bullish on both companies. McCrohan doesn't cover Discover.


The credit card company is expected to report its fourth-quarter earnings on Feb. 8. Analysts, on average, anticipate earnings of $1.45 a share on revenue of $2.47 billion.

"We anticipate both V and MA will reiterate guidance (including V's expectation for P&L growth re-acceleration in F13), but we continue to believe there is a higher probability that V will raise guidance over the next couple of quarters than MA, since V's guidance extends only through F12 (MA is through F13), and we believe V's guidance had a conservative bent when it was initially provided following release of the final Fed Durbin rules last summer," Jefferies analysts wrote in a report on Jan. 26.

Shares of Visa rose to $107.82 on Friday. The stock's 52-week low of $70.45 was set on March 15.

In the consumer finance sector, the average estimated price-to-earnings ratio for next year is 10.79. Visa's forward P/E of 15.76 tops the average.

Thirty-three of the 40 analysts who cover Visa rated it a buy. The remainder said it was a hold.

TheStreet Ratings gives Visa an A grade with a buy rating and $125.82 price target. The stock has risen 5.35% year to date.

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