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MasterCard Soars to New 52-Week High - Analyst Blog

Posted
12/31/2013 10:19:00 AM
By: Zacks.com
Referenced Stocks:ADS;FISV;MA;V

Riding on a steady growth momentum, shares of MasterCard Inc. ( MA ) hit a new 52-week high of $833.30 on Dec 30. This global electronic payment processing giant's shares has escalated 63.9% since the beginning of 2013.

Moreover, shares of MasterCard have jumped 16.2% since the company reported its third-quarter 2013 results at the end of October with a positive earnings surprise of 3.2%. The encouraging momentum of this Zacks Rank #3 (Hold) stock is driven by improved card spending coupled with competitive pricing.

Yesterday's closing price represents a strong one-year return of about 72.5% against a return of 31.3% clocked by the S&P 500 index. Average volume of shares traded over the last three months stands at approximately 583.7K.

Earnings Review

On Oct 31, MasterCard reported third-quarter operating earnings per share of $7.27, which modestly surpassed the Zacks Consensus Estimate of $6.95 and the year-ago quarter number of $6.17.

Results reflected better pricing, increased number of processed transactions and strong gross dollar value growth. Accordingly, operating income and margins witnessed a boost and in turn, drove operating cash flow. Growth was however, partially hindered by higher operating expenses.

Overall, MasterCard's capital position remains one of the sturdiest in the industry. The company alsobenefits from strong secular demand growth, meaningful international exposure, excellent pricing power and dynamic business mix. Moreover, the latest capital plan including a 10-for-1 stock split and an 83% hike in regular dividend continue to boost investors' confidence in the stock.

Valuation

Further, valuation looks very compelling for MasterCard. Both on forward price-to-earnings and price-to-book basis, the shares are trading at a premium of about 30% and 140%, respectively, to the peer group average. Moreover, return on equity of 43.7% and return on assets of 24.8% stood significantly higher than the peer group average. Even estimated long-term earnings growth is pegged at 17.6%, higher than the peer group average of 13.5%.

Some better-ranked stocks that warrant a look in the financial sector are Visa Inc. ( V ), Fiserv Inc. ( FISV ) and Alliance Data Systems Corp. ( ADS ). All these stocks carry a Zacks Rank #2 (Buy).



ALLIANCE DATA (ADS): Free Stock Analysis Report

FISERV INC (FISV): Free Stock Analysis Report

MASTERCARD INC (MA): Free Stock Analysis Report

VISA INC-A (V): Free Stock Analysis Report

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