On Jan 13, 2015, we issued an updated research report on MasterCard IncorporatedMA .
One of the main catalysts for MasterCard's long-term growth is the transition from paper-based payments such as cash and checks to electronic forms such as card payment transactions. This transition has significantly bolstered MasterCard's business paved the way for further growth, going ahead.
Supported by increasing cross-border volumes and improved pricing along with consistent growth of processed transactions, the company is confident of a steady rise in revenues. Additionally, the financial transaction service provider remains focused on making strategic acquisitions as part of its long-term inorganic growth strategy. Also, product and geographic diversification as well as new market penetration will boost the company's long-term prospects.
MasterCard has engaged in shareholder friendly moves through dividend hikes and share repurchase programs. Last month, the company raised its regular quarterly dividend by 19% to 19 cents per share together with the sanction of a new share repurchase program. The insurer now has shares worth $786 million remaining under the current buyback program.
However, increased dependence on international operations, currency fluctuations and challenging forex environment as well as higher operating expenses are likely to affect the bottom line and the top line of the company. Moreover, the slow paced and volatile credit quality of the market adversely impacted the company's credit and charge card growth. Also, intense competitive pressure and economic volatility are other headwinds.
MasterCard is scheduled to report its fourth-quarter 2015 results on Jan 29, 2016. Our proven model does not conclusively show that the company is likely to beat estimates this earnings season. This is because MasterCard has a negative Earnings ESP as the Most Accurate estimate stands at 68 cents while the Zacks Consensus Estimate is pegged higher at 69 cents. Though a Zacks Rank #3 (Hold) increases the predictive power of ESP, the company's negative ESP makes surprise prediction difficult.
Stocks to Consider
Some better-ranked stocks from the same sector are Global Payments Inc. GPN , The Allstate Corporation ALL and Fidelity National Financial Ventures FNFV . While Allstate and Fidelity National sport a Zacks Rank #1 (Strong Buy), Global Payments holds a Zacks Rank #2 (Buy).
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