Two credit-card companies, two different responses to their earnings. While disappointed investors have sold off shares of Visa (V), MasterCard (MA) is relatively unchanged.
Bloomberg MasterCard reported a profit of $7.27 a share, beating forecasts for a profit of $6.94, while Visa said it earned $1.85 a share, in line with analyst forecasts.
The big difference between the two: Europe. MasterCard has it, Visa not really. Bloomberg explains:
Europe accounted for 28 percent of MasterCard purchases in the three months through June 30, company data show. Visa generates about 2 percent of its revenue on the Continent as domestic transactions are handled by Visa Europe Ltd., a separate firm owned by banks that pays royalties to its U.S.-based namesake.
Raymond James analysts Wayne Johnson and Brandon Pickett tell investors not to worry about Visa:
We are reiterating our Strong Buy investment rating on shares of V after a solid F4Q13 highlighted by healthy transaction volumes in all geographies and significant share repurchase activity. However, a stronger U.S. dollar is negatively impacting top-line growth and domestic payment volume is beginning to modestly slow due to a mix of lower gas prices and stagnant economic growth. That said, rest of world trends remain healthy and the company remains committed to returning capital to shareholders, as evidenced by the announcement of a large new buyback program yesterday and a significant quarterly dividend raise last week. We continue to think Visa is one of the most attractive growth investments in our space and expect the company to push through any near-term headwinds.
Sterne Agee’s Greg Smith and Jennifer Dugan are not so sure:
Visa noted some slowing in spending and more FX pressure and consequently lowered its revenue guidance for FY14 while maintaining its EPS guidance. Visa continues to manage expectations and execute well, but we still do not see a favorable risk/reward here in light of competitive threats and potential regulatory-related pressures.
Jefferies’ Jason Kupferberg and team call MasterCard’s earnings “a nice Halloween treat.” They write:
MA’s overall 3Q print was impressive, highlighted by better than expected volume and processed transaction growth, including acceleration in Europe and an upside surprise in US credit, both of which we think are important positives. Net revs beat JEFe/Street by 1.7%/4.0% on lower rebates, and even excluding the benefit from lower tax, EPS beat JEFe/Street by 1.0%/2.5%.
Shares of MasterCard have dropped 0.1% to $724.75 at 2:03 p.m. Visa, meanwhile, has fallen 2.8% to $198.16. American Express (AXP) has dropped 1.3% to $82.02 and Discover Financial Services (DFS) is off 0.7% at $52.12.
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