Why MasterCard Is Expected To Beat Wall Street Forecasts

MasterCard Inc. (MA) is set to report FQ4 2013 earnings before the market opens on Friday, January 30th. MasterCard is a global financial services company most well known for the debit and credit cards that bear its name. Before the opening bell on Thursday fellow credit company Visa (V) posted stronger than expected earnings and reported an increased frequency in card use. An expanding middle class in emerging markets is predicted to be an area of growth for MasterCard, however recent turbulence in Turkey, Argentina, Ukraine and other emerging economies could cause a set back. Additionally Master is expected to benefit from new technologies such as Stripe and Square which are making it easier for customers and businesses to transfer money using credit cards over the internet. Here is what investors expect MasterCard to report on Friday.

The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.

(Click Here to see All Estimates for MasterCard)

The current Wall Street consensus expectation is for MasterCard to report 60c EPS and $2.134B revenue while our current consensus from 27 Buy Side and Independent contributing analysts is 62c EPS and $2.162B revenue. This quarter the buy-side as represented by our community is expecting MasterCard to beat the Street’s expectations on both profit and revenue.

The magnitude of the difference between Wall Street's and our consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing an average differential between the 2 groups’ EPS forecasts.

Over the previous 6 quarters the aggregate consensus from our community has been more accurate in forecasting profit and revenue 5 and 4 times respectively. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors, we have created a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market’s actual expectations. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from us than from the Wall Street consensus.

The distribution of estimates published by analysts on our platform range from 59c to 65c EPS and $2.134B to $2.200B in revenues. This quarter we’re seeing a large distribution of estimates on profit and a smaller distribution of estimates on revenue.

The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A larger distribution of estimates signaling less agreement in the market, which could mean more volatility post earnings.

Throughout the quarter the EPS consensus from Wall Street and us both remained flat at 60c and 62c respectively. Over the same period of time the revenue expectations from both groups have been rising. Wall Street raised its consensus from $2.127B to $2.135B while our community raised its aggregate expectation from $2.140B to $2.162B. Timeliness is correlated with accuracy and rising expectations going into the report are often a bullish indicator.

The analyst with the highest estimate confidence rating this quarter is cixoTrades who projects 63c EPS and $2.197B in revenue. In the Winter 2014 season cixoTrades rated as the 15th best analyst and is ranked 19th overall among over 3,650 contributing analysts. This season cixoTrades touts an impressive 64% accuracy rate vs Wall Street on EPS and 68% vs the Street on revenue. Our confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. This quarter cixoTrades agrees with our community that MasterCard will beat Wall Street’s expectations, but cixoTrades thinks they will do it by a wider margin.

This quarter analysts on our platform are expecting MA to go above and beyond the bar set by Wall Street. Year over year profit and revenue are both expected to be up and MasterCard is looking to build on the back of 2 consecutive better than expected quarters.

Source: Why MasterCard Is Expected To Beat Wall Street Forecasts

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