Is the Credit Card Company Rally Coming to an End?
MasterCard (NYSE:MA) reported fourth-quarter and full-year 2012 results before the markets opened on Thursday that initially had investors bidding shares up as much as 3.75 percent in the pre-market. Shares hit $535.35, above a 52-week high of $532.47, before falling to open at $532 per share, and dropping from there.
Shares were effectively flat by afternoon trading as strong results were slowly eclipsed by the prospect of a weak 2013. Fourth-quarter net revenue increased 10 percent to $1.9 billion, while net income increased from $0.15 per share in 4Q 2011 to $4.88 in 4Q 2012. On a local-currency basis, MasterCard saw a 14 percent increase in gross dollar volume to $986 billion.
For the year, revenue climbed 10 percent to $7.4 billion, while earnings increased 18 percent to $22.04 per diluted share — by all measures a strong year. The company’s 2012 results helped catalyze a 33.4 percent climb on the stock chart, and on January 30 shares were up 45.1 percent year over year. The rally has been phenomenal, and not just for MasterCard…
As a whole, credit card companies have been on a tear for the past 52-week period. Capital One Financial Corp. (NYSE:COF) is up 23.6 percent year over year, American Express (NYSE:AXP) is up 18.3 percent, and Visa (NYSE:V) has climbed an incredible 54 percent for the period, and an even more incredible 121.9 percent over the past two years.
But grumblings are emerging from bears who may finally be waking up after a long period of slumber. All good rallies must come to an end, and 2013 forecasts issued by some of these companies so far suggest that the time may be approaching for credit card companies to slow down and smell the roses.
Capital One Financial faced hard selling pressure after it announced fiscal 2013 guidance of $22.5 billion, below I/B/E/S estimates for $23.2 billion. The stock dropped 7.5 percent on the announcement. MasterCard warned that global economic headwinds could curb spending behavior, negatively impacting transaction volume, and bring down 2013 results.
“Given the current economic backdrop, we expect net revenue growth in the first half of 2013 to be below the 10.7 percent currency-adjusted rate that we saw in the second half of 2012,” MasterCard chief financial officer Martina Hund-Mejean said on the earnings call.
All eyes have turned to Visa, which will report its results on February 6 after the markets close. Analysts are looking for earnings of $1.79 per share, a 20.1 percent year-over-year increase, on revenue of $2.82 billion, a 10.6 percent increase. Visa’s stock performance this year to date also suggests momentum is slowing down.