On Mar 27, 2013, shares of MasterCard Incorporated (MA - Analyst Report) hit a 52-week high of $540.73. The company reported fourth-quarter results with a positive earnings surprise of 1.46%. MasterCard delivered positive earnings surprise in all 4 quarters of 2012 with an average beat of 2.11%. Further the company delivered positive earnings surprise for 12 straight quarters.
On Feb 13, 2013, MasterCard reported its fourth-quarter net earnings of $4.86, which exceeded the Zacks Consensus Estimate of $4.79. Results were up 20.6% year over year from $4.03 earned in the year-ago quarter. Lower share count led to the improvement.
MasterCard in a global diversification of operations engages in a number of strategic partnerships. Among its endeavors to expand its leadership in mobile payments, MasterCard partnered with telecom giants like T–Mobile, Orange in Poland, Vodafone Italy, NTT DOCOMO Inc., Turkcell, Everything Everywhere U.K and Deutsche Telekom in 2012. Its partnership with Comviva, the mobile value added service company, C–SAM and Flying Dove, the authorized distributors for Sony Corporation in Nigeria in 2012 also boosted its e-payment business.
Till date in 2013 the company announced collaborations with Safran SA’s Morpho, data analytics firm Mu Sigma, Equity Bank, VimpelCom, eServ Global, Oltio, Itaú, TIM, Redecard, Gemalto and Excentus to augment its multiple range of services. It also expanded its contract with Intercontinental Hotels Group Plc.
Moreover in Feb 2013, the company declared a dividend of 30 cents representing a 100% increase over the last paid dividend. Additionally its board of directors authorized a $2 billion share repurchase program.
During its fourth-quarter earnings release, MasterCard guided its 2013–2015 revenue CAGR to be in the range of 11% to 14%. The company expects to generate an annual operating margin of 50% and earnings per share CAGR of at least 20%. The overall long-term expected earnings growth rate for this stock is 16.72%.
However, valuation looks reasonable for MasterCard. The shares are trading at a 36.1% and 161.5% premium to the peer group average on a forward price-to-earnings basis and on a price-to-book basis respectively. The return on equity is 95.3% above the peer group average. Nevertheless, the 1-year return from the stock is 26.9%, much above S&P 500’s return of 11.85%.
MasterCard currently carries a Zacks Rank #3 (Hold). Among others in the industry, Alliance Data Systems Corporation (ADS - Analyst Report), Fiserv Inc. (FISV - Analyst Report) and Total System Services Inc. (TSS - Analyst Report) carry a favorable Zacks Rank #2 (Buy) and are worth noting.