Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our thesis.
What: Shares of MasterCard Incorporated (MA -0.03%) were getting rejected today, falling as much as 10%, and closing down 5% after missing the mark in its quarterly report this morning.
So what: The credit card processor came up short on earnings estimates for only the second time in its nearly eight-year history as a publicly traded company, posting a per-share profit of $0.57 against estimates of $0.60. Meanwhile, revenues were just shy of expectations, increasing 12.2%, to $2.13 billion, missing the consensus at $2.14 billion. Rebates apparently helped to bring in new customers, but also lifted costs, causing the earnings shortfall. Further suppressing the share price was a weak forecast, as management said it expected revenue to come in at the low end of its previous range due to a previous JPMorgan Chase agreement that would send MasterCard customers over to rival Visa.
Now what: The report was a rare disappointment for Mastercard, though Visa shares also slumped as the bigger competitor saw slower holiday sales in the key fourth quarter. While investors may be disappointed to hear weak revenue guidance from Mastercard, a 12% top-line growth clip is impressive for a company of this size. The credit card industry also lends itself to high margins and economic moats, two excellent reasons to remain invested in this stock. I'd expect shares to continue to gain over the long term.