This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

MasterCard Has More Room to Run in 2014 (Update 1)

Updated from 10:18 a.m. ET with late morning market action and additional comments on payment processor stocks from KBW analyst Sanjay Sakhrani.

NEW YORK ( TheStreet) -- MasterCard (MA) is hot, following a series of shareholder-friendly announcements late Tuesday, and analysts believe the stock has quite a bit more room to run.

The payment processor's shares were up 3.7% in late morning trading Wednesday to $7792.03, following the announcement of a a 10-for-1 split on Jan. 21, 2014, for investors of record as of Jan. 9.  The split "will not result in any taxable income, gain or loss to stockholders,"  according to the company.

MasterCard also announced an increase in its quarterly dividend on common shares to $1.10 from 60 cents.  Following the split, the quarterly dividend will be 11 cents a share.

The company also put in place a new plan to buy back up to $3.5 billion in common shares.  Those buybacks will commence after MasterCard completes its current $2 billion buyback plan, under which the company is authorized to buy back $524 million in shares. 

MasterCard reported net revenue of $6.22 billion for the first three quarters of 2013, increasing 13% from $5.496 billion a year earlier.  Earnings for the first three quarters came in at $2.493 billion, or $20.46 a share, growing from $2.154 billion, or $17.07 a share, during the first three quarters of 2012.  While earnings grew by 16%, earnings-per-share were up 20%, because the company's weighted average share count declined 3%, reflecting share buybacks.

In comparison, Visa (V) -- MasterCard's payment processing rival -- reported a 13% year-over-year increase in operating revenue for its fiscal 2013 ended September 30, while its earnings grew to $4.98 billion, or $7.61 a share, in fiscal 2013 from $2.144 billion, or $3.17 a share, in fiscal 2012.  The 2013 bottom line reflected a tax benefit of $2.277 billion, while the 2012 earnings were hit by $4.100 billion in litigation provisions.

Major Durbin Stakes

MasterCard's stock was up 56% year-to-date through Tuesday's close, exceeding the performance Visa, which was up "only" 33% through Tuesday's close at $199.43.

A major factor in the "drag" on Visa's shares is the lawsuit by a group of merchants against the Federal Reserve of the regulator's implementation of the Durbin Amendment of the Dodd-Frank banking reform legislation.  U.S. district court judge Richard J. Leon in Washington ruled in August that the Fed had "clearly disregarded Congress's statutory intent by inappropriately inflating all debit card transaction fees by billions of dollars and failing to provide merchants with multiple unaffiliated networks for each debit transaction."

The Durbin Amendment placed limits on the interchange fees paid by merchants to banks to process debit card purchase transactions. The amendment also gave retailers more freedom to choose which network to use to route debit card payments.

Leaving aside the ongoing arguments about the fees banks may charge to merchants to purchase debit card purchases, the big issue for the payment processors is whether or not "non-exclusivity rules" for payment networks should apply to all debit card purchases, and not just to the ones requiring the customer to input a PIN code.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,279.74 +13.75 0.08%
S&P 500 2,010.40 -0.96 -0.05%
NASDAQ 4,579.7890 -13.6380 -0.30%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs