Mastercard Remains 'Core Holding' For SunTrust - Mastercard (NYSE:MA)

In a report rolled out Monday, SunTrust analysts Andrew W. Jeffrey and Oscar Turner reiterate a Buy rating on shares of Mastercard Inc MA, while raising their price target from $110 to $120. They assure the stock remains one of the core holdings in the firm’s large-cap growth portfolio.

“The networks boast relative premiums we believe are justified by visible high-teens %-20%+ EPS growth,” the experts expound. This is why they took their 2015 and 2016 earnings estimates in line with the Street, "considering possible revenue headwinds and dilutive recent acquisitions." They now expect earnings of $3.43 per share on revenue of $9.708 billion for 2015; earnings of $4.15 per share on revenue of $10.778 billion for 2016; and above consensus earnings of $5.05 per share on revenue of $11.983 billion for 2017.

The research note highlights three main points to the investment thesis:

1) MasterCard’s revenue growth has been negatively impacted by the U.S. Dollar strength and the loss of Chase’s US credit business. While the analysts cannot predict FX, the do note that “the Chase drag” should begin to lessen in the third quarter – around November or December. Otherwise, they believe the company can will deliver at least 10 percent constant-FX organic revenue growth though 2017 and beyond.

2) SunTrust analysts expect MasterCard to slightly moderate its multi-year revenue growth outlook, from 11 percent-14 percent, to approximately 10 percent -12 percent, at its September analyst day. They see this adjustment as a cause for potential volatility. “That said, we see no reason for MasterCard to lower its 20%+ annual EPS growth outlook. As a result, the ability to generate what are likely above-market risk-adjusted returns - assuming a constant valuation - makes MA a compelling investment,” the experts add.

3) MasterCard’s leading competitive position remains intact, the analysts think.

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