On Mar 6, we maintained our Neutral recommendation on
) based on its strong fundamentals that are poised to generate
robust results once the global economic volatility stabilizes.
However, intense competition and regulatory challenges mitigate
the desired upside currently.
Why Kept Neutral?
Estimates for this electronic payment processor witnessed
minor corrections since the company reported its fourth-quarter
2012 results on Jan 31. MasterCard's fourth-quarter earnings per
share of $4.86 topped the Zacks Consensus Estimate, although
revenue was in line with the latter at $1.9 billion. Both
earnings and revenue outpaced the year-ago results.
The upbeat results reflected better pricing, increased number
of processed transactions, as well as strong gross dollar volumes
(GDV) growth from an array of diversified and user-friendly
products. Modest growth in operating expenses also supported the
Moreover, MasterCard's liquidity remains healthy with no
long-term debt as well as an operating cash flow of $2.95 billion
at the end of 2012 and an unused revolving credit facility worth
$3.0 billion. Strong liquidity not only strengthens the operating
leverage but paves the way for effective capital deployment to
enhance long-term growth.
However, caution is raised over MasterCard's resilience and
ability to raise prices. Moreover, currency fluctuations, the
detrimental effects of the regulatory changes, increased
competition along with higher litigation and operating expenses
will continue to moderate growth in the upcoming quarters.
Following the release of the fourth-quarter results, the Zacks
Consensus Estimate for 2013 inched up 2 cents to $25.48 per share
in the last 30 days. Conversely, the Zacks Consensus Estimate for
2014 edged down 2 cents to $30.02 per share in the last 30 days.
With the Zacks Consensus Estimates for both 2013 and 2014
providing no clear directional pressure in the near term,
MasterCard now has a Zacks Rank #3 (Hold).
Other Financial Stocks That Warrant a Look
While we see no clear directional pressure on MasterCard in
the near term, other stocks in the financial sector that are
). All of these carry a Zacks Rank #1 (Strong Buy).
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