NEW YORK: MasterCard, the second-biggest US payments network, is poised to further outperform bigger rival Visa amid a 3 percent gain by the euro this year and signs that European consumer spending is picking up.
MasterCard, whose stock has outpaced Visa’s in 2013, could gain another 15 percent in two years as the sovereign-debt crisis eases, said Jason Kupferberg, an analyst at Jefferies Group LLC. Europe can boost MasterCard’s purchase volume, transactions and revenue for at least the next two quarters, Stern Agee & Leach Inc.’s Greg Smith said.
MasterCard does more business in Europe than Visa, which generates about 2 percent of its revenue in the region. Should Europe’s economy and currency continue to strengthen at their current pace, MasterCard is more likely to see a boost in profits and stock performance, both analysts said.
“Europe is a significant catalyst for MasterCard relative to Visa,” Smith said Thursday in a telephone interview. “Assuming these general short trends continue, the underlying metrics are going to look a little better for MasterCard.”
MasterCard said that third-quarter net income rose 14 percent to $879m as Europe credit- and debit-card spending climbed 14 percent. Visa, led by Chief Executive Officer Charlie Scharf, said on October 30 that net income fell 28 percent as revenue missed analysts’ forecasts.
MasterCard, based in Purchase, Nnew York, has gained 46 percent this year, outpacing Foster City, California-based Visa’s 30 percent advance. Europe accounted for 28 percent of MasterCard purchases in the first nine months of this year, the company said. That could boost the shares, said Scott Valentin, an analyst at FBR Capital Markets in Arlington, Virginia.
“Investors are looking at both companies and saying, ‘Europe is getting better, the U.S. is slowing down, MasterCard has more exposure to Europe, so therefore I’ll take MasterCard,’ “ Valentin said in a telephone interview.
The euro advanced 4 percent against the US dollar in the quarter ended September 30. US borrowers are raising twice as much debt in Europe this year as in 2012, amid an increase in confidence in the region’s economy.
MasterCard’s gross dollar volume, which includes card purchases and cash transactions at automated teller machines, climbed 15 percent in Europe in the first nine months of 2013 from a year earlier. “European consumer confidence continued the recovery that has started in the second quarter and it’s now back up to the 2010 levels,” MasterCard Chief Executive Officer Ajay Banga, 53, said. “Business sentiment has also improved over the quarter across major European markets like Germany, France, the U.K. and even Italy.”
Visa Europe Ltd, a separate firm owned by banks, handles Visa’s European transactions and pays royalties to the US-based company. The banks hold a put option requiring Visa Inc to buy the overseas namesake for “several billion dollars or more” if exercised.
WP-Bloomberg
