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

NEW YORK ( TheStreet) -- Shares of credit card companies Visa ( V), Discover ( DFS) and MasterCard ( MA) 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.


Visa

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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MasterCard

Shares of MasterCard reached $389.88 Friday. The stock's 52-week low of $240.36 was set on March 1.

"MA met the market's muted expectations and undermined bearish sentiment with forward guidance and commentary on the merchant litigation, in our view," Bank of America Merrill Lynch analysts wrote in a report Thursday. "Following a strong '11, MA continues to execute well -- capturing global volume, promoting electronification of payments and gaining market share. We continue to see secular growth for MA and remain positive on the stock."

MasterCard has a forward P/E of 15.11, which is greater than the sector's average of 10.79.

Twenty-seven of the 37 analysts who cover MasterCard rated it a buy; 10 considered it a hold.

MasterCard gets an A+ grade from TheStreet Ratings with a buy rating and $456.53 price target. The stock has increased 3.99% year to date.


Discover

The credit card company is scheduled to report first-quarter earnings on March 21. Analysts, on average, anticipate earnings of 87 cents a share on revenue of $1.84 billion.

Discover filed a 10-K on Jan. 26 discussing its fee-based products and marketing practices. Keefe, Bruyette & Woods analysts said in a report that "The Consumer Financial Protection Bureau (CFPB) will now join the FDIC (vs. just the FDIC previously) to take a joint enforcement action against Discover Bank with regards to its marketing practices around its fee-based products, including its payment protection fee product. The company noted that it has made changes to both its fee-based products and program prior to the FDIC's and the CFPB's review and believes its current business practices substantially address the regulators' concerns. However, the enforcement action could include civil monetary penalties, significant restitution and additionalbusiness practice changes."

Shares of Discover rose to $28.32 on Friday. The stock's 52-week low of $20.23 was set on Feb. 4, 2011.

Discover's forward P/E of 8.31 is below the sector average at 10.79.

Seventeen of the 26 analysts who cover Discover rated it a buy; nine categorized it a hold.

TheStreet Ratings gives Discover an A- grade with a buy rating and $36.70 price target. The stock has risen 17.67% year to date.

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-- Written by Alexandra Zendrian

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