Jefferies Asks: What's In The 'Cards' This Quarter?

In a report published Tuesday, Jefferies analyst Jason Kupferberg suggested that expectations for credit card processors are "somewhat muted" ahead of earnings next week. According to Kupferberg, both

and

will likely note incremental foreign exchange headwinds in the upcoming earnings report as the U.S. dollar strengthened against many other currencies. However, the analyst noted that the spike in foreign exchange volatility during the first quarter should prove to be a tailwind for Visa's highly profitable cross-border revenue growth. On the other hand, gas prices further declined in the quarter and as gas represents roughly 7 to 8 percent of total U.S. volume for both networks, creating further pressure on the companies. The analyst stated that declining gas prices was the most negative leading indicator he observed at a time when consumer confidence improved. According to Kupferberg both Visa and MasterCard provided initial 2015 guidance that can be considered conservative as a combination of pricing actions, expense controls and share buybacks could result in a constant-currency guidance raise for both firms at some point this year. In addition, investors will be focusing on initial commentary from Visa's new Chief Financial Officer Vasant Prabhu with regard to capital allocation and investment priorities. Between the two firms, Kupferberg has a slight preference for Visa due to sharper top-line acceleration expected throughout 2015, easing cross-border volume comps and a lack of European exposure. Shares of Visa remain Buy rated with an unchanged $75 price target. Shares of MasterCard remain Buy rated with an unchanged $98 price target.