MasterCard: Financial Winner (Update 3)

Updated with market close information and comments on Visa, which is scheduled to report its earnings on Feb. 8.

NEW YORK ( TheStreet) -- MasterCard ( MA) was the winner among major U.S. financial services names on Thursday, with shares rising 7% to close at $381.57.

The payment processor reported fourth-quarter earnings -- excluding "a $495 million after-tax charge related to the U.S. merchant litigations" - of $514 million, or $4.03 a share, blowing past the consensus EPS estimate of $3.92, among analysts polled by Thomson Reuters.

Heading into Friday's unemployment report, the Labor Department on Thursday announced that Following Tuesday's report from ADP that seasonally adjusted initial jobless claims totaled 367,000 during the week ended Jan. 28, declining from a revised 379,000 the previous week.

The broad indexes were mixed. The The KBW Bank Index ( I:BKX) rose 1% to close at 43.62, with 20 of the 24 index components showing gains for the session.

MasterCard reported fourth-quarter net revenue was $1.72 billion, which was slightly behind the consensus estimate of $1.73 billion, but was up over 20% from a year earlier.

The company said that "worldwide purchase volume during the quarter was up 15.2% on a local currency basis versus the fourth quarter of 2010, to $648 billion."

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CEO Ajay Banga said the company was seeing "sustained momentum driven by new deals and the ongoing shift away from paper-based payments."

Heading into the company's evening conference call, Morgan Stanley analyst Glenn Fodar said "key focal points" would include "texture on potential expectations for F12 (e.g. a directional view on rev growth/margin), color on the European trajectory and the (obligatory) update on the implementation" of the Durbin Amendment in the fourth quarter, which capped debit card interchange fees.

MasterCard's shares trade for 18 times the consensus 2012 EPS estimate of $21.52. Out of 35 analysts covering the company, 26 rate MasterCard a buy, while the remaining analysts all have neutral ratings.

Interested in more on MasterCard? See TheStreet Ratings' report card for this stock.

Shares of Visa rose 3.5% to close at $106.06.

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The company is set to report its fiscal first-quarter results next Wednesday after the market closes, with analysts polled by Thomson Reuters expecting operating EPS of $1.45, compared to $1.23 a year earlier.

Visa announced on Dec. 23 that it had added $1.565 billion to its litigation escrow account, bringing the account up to $4.3 billion, with JPMorgan analyst Tien-tsin Huang saying at that time that the losses were likely related to prix fixing lawsuit brought by a group of merchants against Visa, MasterCard, and several banks, including Bank of America ( BAC), Citigroup ( C), and JPMorgan Chase ( JPM).

Oppenheimer analyst Glenn Greene rates Visa "Outperform," with a price target of $400, and estimates the company will earn $1.44 during the fiscal first quarter and $5.87 for fiscal 2012, matching the consensus estimate.

Greene said on Jan. 17 that he anticipated "21% Y/Y international purchase volume growth to $489B (vs. 8% domestic growth to $534B) in the December quarter" for Visa."

The shares trade for 18 times the consensus fiscal 2012 EPS estimate. Out of 35 analysts covering Visa, 28 rate the shares a buy, while the remaining analysts all have neutral ratings.

Interested in more on Visa? See TheStreet Ratings' report card for this stock.


-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.