Q4 Preview: MasterCard (MA) Investors Mixed as Spending Up, Transactions Down

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MA Hot Sheet

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MasterCard (NYSE: MA) is making investors feel as fresh as a spring daisy Wednesday heading into its fourth-quarter earnings report, expected out before the market opens Thursday.

Earnings for MasterCard are expected to be $3.92 per share on revenue of $1.73 billion, indicating earnings growth of 24 percent from the same period last year.

Valuation on MasterCard may seem rich at about 16 times earnings, which is mostly in-line with peers Visa's (NYSE: V) 15 times, but more expensive than that of Discover Financial (NYSE: DFS) and Capital One (NYSE: COF).

Recently, research firm First Data said credit card spending jumped by about 7 percent over the holidays, a boon for merchants and credit-card issuers as well. With comScore reporting holiday eCommerce spending rose about 15 percent, the numbers could be even juicier.

Data from Bloomberg has 27 analysts with a Buy, 10 at Hold, and none maintaining a Sell. MasterCard has traded within a range of $230.31 to $384.99 over the last 52-weeks, compared with the Street's price target average of $407 and a range of $298 to $500.

Analyst Comments

Deutsche Bank is looking for earnings of $3.99 and revenue of $1.762 billion. Operating margins should come in at $51.2 percent. The firm recently commented: "We believe MasterCard will continue to grow on the strength of its international business. However, we believe that the implementation of the Durbin Amendment will create a drag on U.S. revenue growth based on some price pressure from large issuers, as well as potential volume deceleration resulting from changes to debit programs. We do not believe share gains in U.S. PIN Debit will be enough to offset these factors."
Wells Fargo is looking for EPS of $3.84 and revs of $1.75 billion, mixed to Street views, seeing headwinds as the stronger dollar, European transaction reductions, and less margin expansion.

The firm thinks investors will be looking for: "1) The monthly progression of business in Europe. 2) Margins. We believe that this is the key issue with the market fearing a flat outlook in 2012 that is priced into the stock in our opinion. Any discussion of modest expansion should serve as a catalyst for the shares. 3) Color on the merchant litigation, though we don’t expect a lot here."

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out MasterCard's past performance at Streetinsider's MasterCard's Income Statement.

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