Mastercard (MA) Estimates and Price Target Cut at Wedbush

Wedbush analyst, Gil Luria, cut his estimates and price target on Mastercard (NYSE: MA) to $92 from $100 on greater headwinds from reduced travel on greater macro headwinds. Estimates came down leading to a lower price target on a consistent industry multiple.

Revenue of $2.517 billion grew 9% constant currency and fell short of consensus of $2.56 billion. Revenue continues to be impacted by weakness in key EM countries including slowing growth in Brazil and China. EPS of $0.79 beat consensus due to lower than expected tax rate. We believe the lower tax rate added $0.13 of additional EPS while acquisitions diluted EPS by $(0.03).

Business remained somewhat insulated from the global economic slowdown, but the analyst sees risk for the balance of the year from further EM weakness and reduced travel. Despite these challenges and declining gas price, worldwide GDV grew 12% with ROW growing 14% (both constant currency). Processed transactions also grew 12%, in line with the previous quarter. Cross border volume remains a concern with growth decelerating 3 ppt sequentially to 12.3% constant currency due to increased intra-Europe activity and lower inbound US volume. Company indicated volumes growth in January tracking in line with Q4.

The company retained its long-term guidance for 2016-18 of net revenue CAGR in the low double digits, operating margin over 50% and an EPS CAGR in the mid-teens when based on a revised 2015 EPS of $3.12 (reported $3.44 of EPS). However, the analyst is reducing his 2016 EPS estimate to $3.55 from $4.02 to reflect a challenging environment and currency headwinds.

The analyst maintained his NEUTRAL rating but reduced the price target to $92 from $100 based on lower estimates and a consistent a 26x multiple of 2016 EPS.

For an analyst ratings summary and ratings history on MasterCard click here. For more ratings news on MasterCard click here.

Shares of MasterCard closed at $89.03 yesterday.

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