Will MasterCard (MA) Surprise This Earnings Season? - Analyst Blog

MasterCard Inc. MA is scheduled to release its first-quarter 2014 financial results before the opening bell on May 1.

In the last reported fourth-quarter 2013, the company had delivered a 5.0% negative earnings surprise. Nonetheless, the four-quarter trailing average beat is pegged at 4.0%. Let's see how things are shaping up for this announcement.

Earnings Whispers?

Our proven model shows that MasterCard is unlikely to beat earnings this quarter as it lacks the required combination of two key ingredients.

Zacks ESP: The Most Accurate estimate of 72 cents per share is at par with the Zacks Consensus Estimate of MasterCard. Hence, the Expected Surprise Prediction or Earnings ESP, which is the difference between the aforementioned estimates, is 0.00%.

Zacks Rank: MasterCard has a Zacks Rank #3 (Hold). Note that stocks with Zacks Rank #1, 2 and 3 have significantly higher chances of beating earnings. Conversely, Sell-rated stocks (#4 and 5) are kept under the radar and are never considered going into the earnings announcement. 

The combination of MasterCard's Zacks Rank #3 and 0.00% ESP makes surprise prediction difficult.

Factors Seeking Attention

MasterCard enjoys ample competitive advantage and a sufficiently risk-free balance sheet, which supports efficient capital deployment, generating incremental shareholder value. However, it also faces intense regulatory challenges across the major jurisdictions of the U.S., European Union and Russia, among others. Such regulations and sanctions not only hit the top line but also hamper margins.

At such a juncture, reducing expenses remain the last resort to sustain bottom-line growth, as witnessed by arch-rival Visa Inc.'s V earnings release, for the quarter ended Mar 2014, last week. We believe the risks related to regulations, currency fluctuations and economic volatility are likely to directly impact MasterCard's spending and earnings.

Nonetheless, the recent acquisitions of C-SAM Inc. and Turkey's Provus Bili im Hizmetleri AS along with other alliances and technology upgrades boost product-diversification and geographic-expansion initiatives. These efforts should lift operating leverage and financials in the upcoming quarters.

Other Stocks to Consider

Here are some other financial companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this coming quarter: 

Everest Re Group Ltd. RE, earnings ESP of +7.85% and a Zacks Rank #1 (Strong Buy).

Lazard Ltd. LAZ, earnings ESP of +1.82% and a Zacks Rank #1.

CBOE Holdings Inc. CBOE, earnings ESP of +3.70% and a Zacks Rank #3 (Hold).