Fly Intel: What to watch in credit card space earnings reports

American Express (AXP), MasterCard (MA), and Visa (V) are scheduled to report quarterly results on January 24, 29, and 30, respectively. What to watch for:

1. OUTLOOKS: During the company’s last earnings call, American Express said it sees fourth quarter revenue growth up 8%-10%, and backed the fiscal year 2019 adjusted earnings per share view of $7.85-$8.35, with consensus at $8.12. The company also said it sees double-digit earnings per share growth in fiscal year 2019, the fiscal year 2020 adjusted earnings per share growth in the mid-teens, and fiscal year 2020 revenue growth low double digits.

Meanwhile, back in October, MasterCard said it sees fiscal year 2019 revenue growth at “high end of low teens,” fiscal year 2019 tax rate of approximately 18%, fiscal year 2019 adjusted OpEx growth in the “high end of single-digits,” and fourth quarter adjusted OpEx growth in the “high single-digits.”

2. FTC INVESTIGATION: In a regulatory filing, Visa confirmed that on November 4, 2019, the Bureau of Competition of the United States Federal Trade Commission requested that Visa provide, on a voluntary basis, documents and information for an investigation as to whether Visa’s actions inhibited merchant choice in the selection of debit payments networks in potential violation of the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act.

According to a report by Bloomberg, both Visa and MasterCard have drawn an inquiry by U.S. antitrust regulators over policies that can prohibit merchants from routing card transactions over alternative debit networks. At issue is whether the card companies and big debit card issuers are blocking retailers from routing certain mobile wallet payments and tap-to-pay transactions over alternative networks such as Pulse, NYCE and Star, sources told Bloomberg.

3. PLAID ACQUISITION: Last week, Visa announced it has signed a definitive agreement to acquire Plaid, for a total purchase consideration of $5.3B. The transaction is subject to regulatory approvals and other customary closing conditions. Visa will fund the transaction from cash on hand and debt issuance at the appropriate time. This transaction will have no impact on Visa’s previously announced stock buyback program or dividend policy. The transaction is expected to close in the next three to six months.

4. DIVIDEND INCREASE: Mastercard announced late last year that its board had declared a quarterly cash dividend of 40c per share, a 21% increase over the previous dividend of 33c per share. The cash dividend will be paid on February 7, 2020, to holders of record of its Class A common stock and Class B common stock as of January 9, 2020.

The board also approved a new share repurchase program, authorizing the company to repurchase up to $8B of its Class A common stock. The new share repurchase program will become effective at the completion of the company’s previously announced $6.5B program. The company has approximately $300M remaining under the current program authorization.

5. ATTRACTIVE VALUATION: In a research note to investors last week, William Blair analyst Robert Napoli reiterated an Outperform rating on American Express after reviewing the company’s monthly data and trends in retail sales. The analyst believes valuation for the stock is “attractive given outlook and relative metrics to S&P 500.” While some investors seem concerned about 2020 guidance, Napoli noted that management is confident in its outlook for 8%-10% revenue growth and double-digit EPS growth in 2020.

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