Visa Vs. Mastercard

Shares of Visa Inc V are up 2 percent year-to-date, while Mastercard Inc MA shares have lost 2 percent. This outperformance may be partly explained by Visa generating faster revenue and profit growth, along with announcing a number of notable contract wins last year, JPMorgan’s Tien-tsin Huang said in a report.

In a bid to explain the key differences between Visa and MasterCard, analyst Tien-tsin Huang mentioned the following:

• Visa is the runaway scale leader: Visa has greater scale than MasterCard, with 61 percent higher total volumes, 49 percent higher purchase volume, 45 percent higher net revenue, and a 12-point operating margin premium. Moreover, Visa has about 66 percent market share in all key geographies.
• Revenue and volume mix: Visa's mix of US purchase volume is 18 points higher than MasterCard’s, while its US revenue is 15 points higher. Visa also has higher exposure to emerging markets, such as Asia Pacific, Middle East and Africa and Latin America.
• Shareholder and financial returns: MasterCard closed the gap with Visa in terms of its dividend payout ratio in 2015, with both companies offering about 19 percent of their profits in dividends. MasterCard increased its share repurchases 4 percent and returned 109 percent of adjusted net income to shareholders in 2015, while Visa increased its share repurchases 8 percent and returned only 81 percent of adjusted net income to shareholders.
• Income statements: “Despite being the larger company, Visa posted slightly faster adjusted net income (370bps more) and EPS growth (340bps more) in 2015. Visa enjoyed a six-point revenue and a nine-point operating profit growth premium relative to MasterCard, last year,” the analyst wrote.

Huang reinitiated coverage of Visa with an Overweight rating and a price target of $88. JPMorgan maintained an Overweight rating for MasterCard, with a price target of $108.