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MasterCard (MA) vs. Western Union (WU): Which Stock is Better?

The Zacks Financial Transaction Services industry is one of the top sectors in the Zacks Industry Rank. Of the 265 different sectors, the Financial Transaction Services is ranked 20th, which is in the top 8% of the Zacks Industry Rank.

Two of the most recognizable names in this sector are MasterCard Inc. (MA) and The Western Union Company (WU). Both companies have a Zacks Rank #2 (Buy). With that in mind, let’s take a deeper look at some key company metrics to determine which one is potentially the better investment to add to your portfolio.

Earnings

Over the past four earnings quarters, MasterCard outperformed our estimate three times, whereas Western Union outperformed four times. It should be noted that the one time MasterCard did not outperform the estimate, it actually met the estimate figure.

Starting with the second quarter of fiscal 2015, MasterCard surprise percentages for outperforming our estimate were 0%, 3.41%, 16.18%, and 1.18%, respectively. Starting with the first quarter of fiscal 2015, Western Union’s surprise percentages were 2.63%, 5.13%, 2.27%, and 2.44%, respectively. Western Union is set to report its fiscal 2016 first quarter earnings report on May 3rd.

Earnings revisions for the companies’ fiscal 2016 second quarter and for the fiscal 2016 year are more promising for MasterCard compared to Western Union. MasterCard has a total of four positive earnings revisions for the upcoming quarter – two each that have been revised in the past thirty and sixty days – and another nine positive earnings revisions for the fiscal year.

Western Union has had two total earnings revisions with both of them being positive, one each in the past thirty and ninety days. Regarding earnings revisions for the fiscal 2016 year, Western Union has had three positive ones, two in the past sixty days and one in the past thirty days.

 Growth

Both MasterCard and Western Union have not had exceptional figures for EPS & sales growth. MasterCard had earnings losses versus the previous quarter of 13.19% and gains versus the previous year of 9.72%. The credit card financers also had sales losses versus the previous quarter of 0.51% and marginal gains versus the previous year of 4.18%.

Western Union’s EPS & sales growth figures were not better than MasterCard’s, in that Western Union did have any positive figures in these categories. Western Union had earnings losses versus the previous quarter of 6.67% and 0% versus the previous year. The money wirers had sales losses versus the previous quarter of 1.37% and losses versus the previous year of 2.12%.

Value

Of the two companies, Western Union has the better PE ratio, 12.24, compared to MasterCard’s 27.48. The companies’ return on equity (ROE) and return on asset (ROA) figures are also not very impressive. MasterCard’s ROE quarter-to-quarter change is 4.48% and its ROA quarter-over-quarter change is -0.15%. Western Union’s ROE quarter-over-quarter change is -2.97% and its ROA quarter-over-quarter figure remained the same.

Final Thoughts 

MasterCard did report a solid fiscal 2016 first quarterly report, which does somewhat help with the decision between it and Western Union. Of the two competitors in this latest versus installment, the victor is MasterCard by a hair. The difference in each companies’ key metrics are quite marginal, so much of your final decision will come to personal preference.

The tie-breaker here would have to be MasterCard having better growth figures versus the previous quarter and year compared to Western Union. Unless market price is something that concerns you as an investor, these two companies are rather similar and it’s a coin toss between them. Potentially waiting for Western Union to report its first quarter earnings would be wise.

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MASTERCARD INC (MA): Free Stock Analysis Report
 
WESTERN UNION (WU): Free Stock Analysis Report
 
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