Global electronic payment processing giant – MasterCard Inc. (MA) is scheduled to release its second-quarter 2014 financial results before the opening bell on Jul 31.
In the last reported quarter, the company had delivered a positive earnings surprise of 1.4%, while the four-quarter trailing average beat is pegged at 3.3%. Let us see how things are shaping up for this announcement.
Earnings Whispers?
Our proven model shows that MasterCard is not likely to beat earnings this quarter as it lacks the required combination of two key components.
Zacks ESP: The Most Accurate estimate of 77 cents per share is at par with the Zacks Consensus Estimate of MasterCard. Hence, the Expected Surprise Prediction or Earnings ESP, which is the difference between the aforementioned estimates, is 0.00%.
Zacks Rank: Though MasterCard’s Zacks Rank #3 (Hold) increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
Sell-rated stocks (#4 and 5) should never be considered going into the earnings announcement, especially when the company is witnessing negative estimate revisions momentum.
Factors that Seek Attention
As much of the fear regarding stringent regulations from Russia, that loomed for most the second quarter, has alleviated now, MasterCard is contemplating potential alliances with local operators in Russia. The company faces intense regulatory challenges across the major jurisdictions of the U.S. and European Union, among others, as well.
Such regulations and sanctions not only hit the cross-border transaction but also hamper margins. This is also evident from the lower-than-expected cross-border volumes recorded by Visa Inc. (V) in the past quarter.
Moreover, the addition of debt in balance sheet, along with higher acquisition and operating expenses is likely to limit cash flow growth. Furthermore, stiff competition, currency fluctuations and economic volatility are likely to directly impact MasterCard’s spending and earnings.
Nevertheless, the strategic acquisitions (of ElectraCard Services Pvt. Ltd. and Pinpoint Pty. Ltd. during the second quarter) and alliances, launch of MasterPass in Singapore and New Zealand, a diversified portfolio and technology upgrades are expected to boost fundamentals and supports efficient capital deployment, thereby retaining shareholder confidence.
Other Stocks to Consider
Here are some other financial companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Qiwi Plc (QIWI) has Earnings ESP of +4.76% and a Zacks Rank #1 (Strong Buy).
United Insurance Holdings Corp. (UIHC) has Earnings ESP of +2.33% and a Zacks Rank #1.
Lazard Ltd. (LAZ) has Earnings ESP of +1.59% and a Zacks Rank #2 (Buy).
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