On Thursday, MasterCard (NYSE: MA [FREE Stock Trend Analysis]) reported its first quarter results. The payment-processor earned $0.73 per share, topping the consensus estimate of $0.72.
Revenue of $2.17 billion beat analyst expectations by $30 million.
MasterCard's net income for the quarter rose to $870 million, from $766 million in the same quarter a year ago, as gross dollar volume of transactions rose 14 percent to $1.0 trillion year over year. The company processed 9.8 billion transactions in the quarter, good for a 14 percent rise from a year ago.
MasterCard started fiscal 2014 on the right track by securing several new agreements with large retailers, including Wal-Mart and Sam's Club, who will flip their co-brand portfolios to MasterCard.
Target also shifted its co-brand to MasterCard, and will utilize MasterCard's chip and PIN technology across all of its card products. The Wall Street Journal said MasterCard has gained a competitive advantage and a head-start over rival Visa in chip and PIN adaptation.
MasterCard reiterated its fiscal 2013-to-fiscal 2015 guidance of an 11 percent to 14 percent revenue compounded annual growth rate and earnings per share growth of more than 20 percent.
Oppenheimer: Solid Growth To Continue
Glenn Greene of Oppenheimer believes MasterCard's solid first quarter was no fluke, and that the company should continue to deliver in the second quarter.
"Broadly, spending trends were solid despite the challenging retail climate," Greene wrote in a research note on Thursday. "April trends appeared stable/improved across all metrics, which appears consistent with the recent winter thaw and the timing of Easter."
MasterCard's volume growth was "healthy" and within the analysts' expectations, but nevertheless an impressive feat to accomplish given a challenging retail environment.
International volumes were "solid" with double-digit growth in Europe, despite geo-political events in Russia and Ukraine impacting volumes somewhat, according to Greene -- who added that Russia accounts for approximately two percent of the company's revenue and any loss should "prove manageable."
Bottom line, Greene believes that MasterCard is positioned to benefit from expanding consumer consumption as well as a continuing trend towards electronic payments.
Shares are Outperform rated, with a $90 price target.
Deutsche Bank: Share Gains "Evident"
Bryan Keane of Deutsche Bank believes MasterCard is poised to gain market share over the coming quarters, as the company was able to "weather the storm" in the first quarter.
"Despite prior quarter expectations of soft consumer spending given harsh winter weather, reduced foot traffic, lower consumer spending and the delay to Easter to the second quarter, operating metrics surprised, largely maintaining positive momentum seen in January and the fourth quarter," Keane wrote in a research note on Thursday. He also forecast that "consumer spending should re-accelerate in the second quarter given more favorable weather, increased foot traffic, and holiday spending."
Keane believes MasterCard's co-brand wins in the quarter will offset the impact of the Chase migration, which was previously announced and is expected to occur in the second half of 2014.
Keane also notes that any revenue shortfalls from Russia "is not expected to have a material impact" for the year.
Shares are Buy rated, with a $91 price target.
Keefe: Encouraging Signs
Sanjay Sakharani of Keefe, Bruyette & Woods believes MasterCard's first quarter results represents encouraging signs for operating trends and growth.
"First quarter was a good start to the year for MasterCard, particularly when considering some of the spending headwinds and there appear to be some encouraging trends on the operating trends side with construction volume trends through April and f/x likely to be a slight tailwind at current levels," Sakharani wrote in a research note on Thursday -- while adding, "you continue to believe shares are attractive at current levels."
Sakharani did, however, point out two negative aspects of MasterCard's earnings report.
First, MasterCard's operating trends were mixed, relative to what the analyst was expecting. Additionally, management is expecting some impact from the situation in Russia, which Sakharani estimates to be a "small impact" for 2014 -- but is rather difficult to estimate a potential impact beyond 2014.