Earnings Preview: MasterCard

Jul.31.12 | About: MasterCard Incorporated (MA)

MasterCard (NYSE:MA) is expected to report Q2 earnings before the market open on Wednesday, August 1 with a conference call scheduled for 9:00 am ET.

Guidance

Analysts are looking for EPS of $5.58 on revenue of $1.88B. Investors may be encouraged by the stronger than expected results reported by Visa (NYSE:V) on July 24. In addition, American Express (NYSE:AXP) reported higher than expected EPS on July 18, although the company's revenue came in lower than expected. American Express said that its card members' spending "remained healthy," although it decelerated year-over-year.

Analyst Views

Furthermore, on July 16, Deutsche Bank recommended aggressively buying shares of Mastercard and Visa after the companies announced a legal settlement with some U.S. merchants. The firm thinks that the deal removes a big risk for the card networks. However, the agreement does allow merchants to begin offering discounts to customers who pay with cash or checks, potentially increasing uncertainty for Visa and Mastercard. Also, in a note to investors on July 24, UBS contended that the risk/reward ratio for MasterCard is still unfavorable. The firm predicted that the company would be hurt by the slowdown in global growth ,and that its Q2 results would reflect this headwind. Moreover, Oppenheimer on July 19 wrote that MasterCard's Q2 trends "held up relatively well," but it added that the company's foreign exchange exposure is a "meaningful" top-line headwind for the company. Still, the firm maintained a $475 target and Outperform rating on the stock.