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Forzberg in Igor,

MasterCard's shares will reach a $100 mark in medium term

I remain upbeat about the shares of MasterCard, a world’s second-largest payment system. The company’s financials for the fourth quarter of 2014 were strong, with revenues of $2.42 bn being up 13.6% y-o-y and 1.7% higher than consensus estimate. The upside was primarily due to an 11% rise in the number of processed transactions to 11.6 bn along with a 19% increase in cross-border volumes. These were partially offset by higher rebates and incentives, primarily attributable to new and renewed business alliances. Acquisitions accounted for around 3% of total revenue growth. During the reported quarter, gross dollar value increased 13% to $1.3 tr, and as of Dec 31, 2014, MasterCard had issued over 2.1 bn MasterCard- and Maestro-branded cards. Core operating income edged up 0.3% y-o-y to $1.02 bn, and the company delivered operating margin of 42.1%. Adjusted EPS jumped 21% y-o-y to 69 cents comfortably beating analysts’ average forecast of 64 cents.

MasterCard ended 2014 with cash and cash equivalents of $5.14 bn and long-term debt of $1.49 bn. During the reported quarter, the company repurchased about 2.1 mn shares for $155 mn. On Dec 2, 2014, the board of MasterCard sanctioned a new share repurchase program worth $3.75 bn, higher than $3.5 bn authorized in Dec 2013. Besides, the company’s regular quarterly dividend was raised by 45.5% to 16 cents per share, which implies indicated dividend yield of 0.7%.

I believe that the recent acquisitions, alliances and technology upgrades, along with product-diversification and geographic-expansion initiatives will allow MasterCard to continue to demonstrate solid growth of financials and reward its shareholders, going forward.

In my opinion,  MasterCard’s shares could be recommended for medium-term investment. Target price is $100.