JPMorgan Sees Mastercard's Guidance As 'Conservative'

JPMorgan reiterated its Overweight rating on Mastercard Inc MA, saying it sees guidance "conservative" and potential upside to EPS.

Mastercard reported 3 percent fall in earnings per share to $0.86 from $0.89, but the number beat the expectations by a penny and was in line with JPMorgan's estimate.

Mastercard net revenues advanced 10 percent to $2.45 billion from $2.23 billion in the previous year quarter. This was also modestly higher than the analysts' expectations of $2.38 billion.

"Core volume trends were slightly below the update provided on the last earnings call, but April trends appear to be stable to Feb/March trends," analyst Tien-tsin Huang wrote.

Mastercard results were hurt by higher operating costs and $40 million in forex loss versus $88 million gain last year.

Huang noted MasterCard volume trends through April 21st were mixed but generally stable sequentially. On a sequential basis, U.S. processed volume growth dropped about a point to 10 percent, while rest of the world processed volume grew about a point at 16 percent.

"Processed transaction growth was stable sequentially to 14%, while cross-border volume growth decelerated about a point to 11%," the analyst continued.

Hung said MasterCard continues to see 2016 constant currency revenue growth towards the low end of its "low double-digit" three-year revenue growth target. The company expects foreign exchange to be a 3-4 point drag to their revenue and EPS growth objectives in FY16, respectively. This implies about "7 percent reported revenue growth and about 11 percent reported EPS growth, on normalized '15 EPS, or about $3 per share."

Huang, whose model calls for 12 percent compounded EPS growth in through FY17, maintained FY16 and FY17 EPS estimates at $3.56 and $4.17, respectively. Street expects EPS of $3.54 for 2016 and $4.14 for 2017.

"We estimate the USAA loss could be a mid-single digit annualized drag to U.S. credit and debit purchase volume, respectively," Huang added.

Huang raised the price target on Mastercard shares to $108 from $103. Shares closed Thursday down 1.22 percent at $97.18.