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Will MasterCard (MA) Pull a Surprise This Earnings Season?

MasterCard Incorporated MA is set to report first-quarter 2016 results on Apr 28, before the market opens. Last quarter, the company had posted a positive earnings surprise of 16.18%. Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter
 
MasterCard’s card payment transactions are likely to have grown in the to-be-reported quarter on the back of rise in card-based transactions.

In addition, the company anticipates global process transaction growth in the first-quarter of 2016.

Further, the company is likely to witness cross-border volume growth and improved pricing in the to-be-reported quarter. These, in turn, have likely driven the revenue growth of MasterCard’s business.

However, exposure to adverse forex environment and fluctuating interest rates, along with higher rebates and incentives offered to customers and intermediaries, are likely to have weighed upon the margins of the company.

Moreover, MasterCard’s international operations have likely faced slow pace of growth, currency fluctuations and operating challenges, which in turn, have adversely affected the top line and operating leverage.

With respect to the surprise trend, MasterCard has delivered positive surprises in three of the last four quarters with an average beat of 8.34%.

Earnings Whispers

Our proven model does not conclusively show that Anthem is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: MasterCard has an Earnings ESP of -1.18%. This is because the Most Accurate estimate is pegged at 84 cents, while the Zacks Consensus Estimate stands at 85 cents.

Zacks Rank: MasterCard carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, a negative ESP makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies from the finance sector that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:

Equifax Inc. EFX has an Earnings ESP of +1.74% and a Zacks Rank #2. The company is slated to report first-quarter earnings results on Apr 27.

CNA Financial Corp. CNA has an Earnings ESP of +13.33% and a Zacks Rank #3. The company is set to report first-quarter earnings on May 2.

Fidelity National Information Services, Inc. FIS has an Earnings ESP of +2.70% and a Zacks Rank #3. The company is slated to report first-quarter earnings results on May 3.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
EQUIFAX INC (EFX): Free Stock Analysis Report
 
CNA FINL CORP (CNA): Free Stock Analysis Report
 
MASTERCARD INC (MA): Free Stock Analysis Report
 
FIDELITY NAT IN (FIS): Free Stock Analysis Report
 
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