MasterCard Could Give Investors Another Earnings Pop This Week

Source: MasterCard.

MasterCard (MA 1.08%), had a turbulent year in 2014, as the card-network company had to deal with everything from geopolitical concerns that threatened its Russian business to currency-related challenges throughout the world. Yet MasterCard shares ended 2014 on a high note, and investors hope the card giant will duplicate its strong performance when it announces its fourth-quarter financial results on Friday morning. With shareholders looking for solid gains in earnings and revenue, MasterCard has a high hurdle to overcome to catch up with the stronger share-price growth rival Visa (V 0.60%) has enjoyed lately. Let's look at what we're likely to see from MasterCard in its report and what's been happening to the company recently.

Stats on MasterCard

Source: Yahoo! Finance.

What's next for MasterCard?
In recent months, investors have been a bit less upbeat about MasterCard earnings, cutting fourth-quarter projections by a penny per share and making similarly small reductions to their full-year 2015 estimates. The stock, though, has climbed 12% since late October, albeit giving up some of the larger gain it experienced between then and now.

Just about all of those gains came after MasterCard's third-quarter earnings report in October. The card giant posted growth in key areas, with total revenue climbing 13% on a 10% increase in the number of transactions processed. Earnings per share rose at an even faster 19% clip, with stock buybacks depressing share counts and give EPS a boost. While currency fluctuations had a slight negative impact on the company, MasterCard's international business outperformed its domestic results, with solid gains across the globe despite challenging economic conditions in Europe and other regions.

Source: MasterCard.

MasterCard should also benefit from a relatively successful holiday season. The company's MasterCard Advisors unit said U.S. retail sales rose 5.5% from Black Friday through Christmas Eve, pointing to increased use of credit and debit cards generally. As economic conditions improve, MasterCard should tap into that growth via increases in payment volume.

Moreover, MasterCard has one less thing to worry about, as it reached a deal with the Russian government to resolve what could have been a catastrophic ban from processing transactions within the nation. U.S. sanctions imposed last year jeopardized the relationship between Russia and the U.S. card network, but MasterCard this month agreed to work with the Bank of Russia, which will act as a settlement office for transactions within the country. MasterCard will gradually shift where it processes transactions into Russia, and hopefully, that will head off any further concerns while still enabling the company to reap financial benefits from its presence within the country.

CEO Ajay Banga. Source: MasterCard.

Still, not everything is going MasterCard's way. One key recent challenge is JPMorgan Chase's (JPM 1.18%) ongoing move away from MasterCard in an exclusive deal with Visa. Because of Chase's dominance of the card-issuing market, MasterCard has seen substantial attrition that has accelerated throughout the year. MasterCard CEO Ajay Banga warned that investors should expect further challenges both in the fourth quarter and into 2015.

In the MasterCard earnings report, it will be vital to see not only whether the company keeps up its growth pace but also what it sees in terms of increasing penetration in underserved areas of the world. With MasterCard believing that 85% of all transactions worldwide still involve cash, the opportunity to expand the company's scope is huge and could drive the company's growth for years to come.