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Both MasterCard (NYSE:MA) and Visa (NYSE:V), the world’s largest processor of debit and credit card payments, released their quarterly earnings reports in the last 48 hours. I was tempted to write about Visa as its shares tried to carry the load on Wall Street on the same day as the Federal Reserve posted its latest, lackluster non-news. With the MasterCard report due within the next day, I thought we might gain more perspective by waiting for both reports to come in.
Visa’s share price rallied by 4.6% after hours on Wednesday, a precursor to what was to come today. Visa is currently selling at 238.79, up more than 11.0%, and is approaching its 52-week high of 239.28.
MasterCard’s results also pushed its share price higher, closing yesterday at 75.99 and opening this morning at 78.35. As of 3:00 p.m. EDT, its shares are trading 8.9% at 82.78. In a recent pattern that bears similarity to Visa, it is also approach its 52-week high of 84.75, which it reached at the beginning of 2014.
Visa Results
Visa closed its fiscal year with a 9% increase in revenue to $3.2 billion for the quarter, while citing that the strengthening of the U.S. dollar negatively impacted the nominal growth rate by 1.5 percentage points. Full-year net revenue totaled $12.7 billion, a nominal increase of 8%. The company processed more that 64.9 billion transactions, up 11% from last year. Pre-tax profits rose from $7.2 billion to $7.7 billion for the full year.
CEO Charlie Scharf noted that, “Our enviable competitive position, strong business model, and great talent helped us deliver adjusted EPS growth of 17% for the fourth quarter and 19% for the full year in the face of continued tepid economic growth and a strengthening dollar. More importantly, the underlying metrics which will drive our revenue growth over the longer term are strong and getting stronger.”
If you wonder how enviable that competitive position is, he added that, “Our partnerships are growing, our capabilities are improving, and the opportunity for Visa to disintermediate cash across the globe is bigger than ever.” This may be the most significant hill that Visa has to climb. Scharf is sending a strong message to investors and competitors that his company is committed to keeping its leadership position in the sector.
MasterCard Results
MasterCard reported results for its third quarter and for the nine months year-to-date. Total revenue YTD rose 13% from $6.2 billion to $7.1 billion, with $2.5 billion coming in the third quarter.
Year to date pre-tax income was $4.1 billion, up 14% from last year’s $3.6 billion. The third quarter contribution was up 12% from $1.25 billion to $1.42 billion.
What about the EPS?
That’s exactly the question that investors should ask, or it is a least one of them.
Visa reported an EPS of $9.07, up from, $7.59 per share in 2013. Visa beat consensus EPS estimates by $0.08 per share.
MasterCard returned an EPS of $0.87 versus $0.73 per share year-on-year for the quarter. MasterCard beat consensus EPS estimates by $0.09 per share.
Where are they headed?
Here’s how I see it. Both companies are operating from a position of strength and neither are willing to relinquish their share of the market. It is clear that we are heading toward a cashless society and that their are a lot of tech companies that are trying to carve out there own space. The competition may be a greater obstacle than the economy, although both reports cited economic headwinds. Neither company is stodgy or dowdy. They have to be tech-savvy no matter what else they do. Not only that, they must continue to stay ahead of the curve in terms of accessibility and convenience. As I said at the beginning of this paragraph, both companies are operating from a position of strength. That’s a good thing.
