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TheStreet Open House

Why MasterCard (MA) Is Down Today

NEW YORK (TheStreet) -- MasterCard  (MA) was falling 5.33% to $75.51 on Friday after the world's second-largest credit card company reported fourth-quarter earningsthat fell short of analysts' expectations. The stock plunged to a low of $71.75 shortly before the market opened but then recovered shortly thereafter.

The company reported net income of $623 million, or 52 cents a share, a 3% increase from $605 million, or 49 cents a share, in the same period a year earlier. Adjusted EPS was 57 cents, which came in below analysts' estimates of 60 cents. Net revenue increased 12% to $2.13 billion; analysts polled by Thomson Reuters expected $2.14 billion.

MasterCard noted that total operating expenses rose 21.1% to $1.21 billion, in part because the company put aside $95 million for litigation settlements. Visa  (V) and MasterCard settled a $5.7 billion class-action suit in December in which merchants accused the two credit card companies of fixing the fees charged to merchants when customers used their credit or debit cards. The merchants also accused the two credit card giants of preventing them from offering customers cheaper payment alternatives.

MasterCard's global purchase volume increased 11% to $805 billion from the same period a year earlier, and annual growth in U.S. purchase volume increased 7.4% to $275 billion.

TheStreet Ratings team rates MASTERCARD INC as a "buy" with a ratings score of A+. TheStreet Ratings Team has this to say about its recommendation:

"We rate MASTERCARD INC (MA) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, increase in net income, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 17.7%. Since the same quarter one year prior, revenues rose by 15.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • MASTERCARD INC has improved earnings per share by 17.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MASTERCARD INC increased its bottom line by earning $2.19 versus $1.48 in the prior year. This year, the market expects an improvement in earnings ($2.64 versus $2.19).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the IT Services industry average, but is less than that of the S&P 500. The net income increased by 13.9% when compared to the same quarter one year prior, going from $772.00 million to $879.00 million.
  • The gross profit margin for MASTERCARD INC is rather high; currently it is at 59.15%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 39.63% significantly outperformed against the industry average.
  • Net operating cash flow has increased to $1,322.00 million or 30.37% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -4.66%.
  • You can view the full analysis from the report here: MA Ratings Report

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