BERWYN, Pa. - (Business Wire) Much like toll-bridge operators, MasterCard and Visa face little competition and operate in a business -- the processing of credit-card transactions -- with high barriers to entry. So they are relatively free to raise fees and earn superior profits. That
’s the conclusion of the latest
Sector Focus commentary by four financial-services sector analysts at Turner Investment Partners.
Turner, an investment firm based in Berwyn, Pennsylvania, publishes Sector Focus commentaries monthly as part of the continuing efforts of its five analyst teams to monitor the market sectors for its growth-stock portfolios.
The commentary, entitled MasterCard and Visa: profitable toll takers, was written by Pablo Echavarria, security analyst; David Honold, security analyst/portfolio manager; Mark Turner, president and senior portfolio manager/security analyst; and Rick Wetmore, security analyst/portfolio manager. In the piece they observe that the profit margins of both companies exceed 30% and estimate that “both MasterCard and Visa can increase their earnings per share by at least 20% annually over the next two years.”
The analysts note that developing countries like Brazil and China may hold the most promise for MasterCard and Visa’s future growth. The highest growth rates in credit-card use are in Latin America, the Middle East, Asia, and Europe, in descending order. Latin America’s growth rate is 27%, compared with 13% in the U.S.
They identify increased lawsuits from merchants, federal legislation around credit-card fees, and online payment competitors such as PayPal as business risks to the companies, but believe those risks are unlikely to significantly impair MasterCard and Visa’s above-average earnings growth. “We think global traffic on MasterCard and Visa’s toll bridges should grow for years to come,” they conclude.
To read this June 2008 Sector Focus in its entirety, see the Turner Investment Partners Web site, www.turnerinvestments.com/sectorfocus. Or call 484-329-2439 for a free copy of the piece.
The views expressed represent the opinions of Turner Investment Partners as of the date indicated and may change. They are not intended as a forecast, a guarantee of future results, investment recommendations, or an offer to buy or sell any securities. Opinions about individual securities mentioned may change, and there can be no guarantee that Turner will select and hold any particular security for its client portfolios. Earnings growth may not result in an increase in share price. Past performance is no guarantee of future results.
Turner Investment Partners, founded in 1990 and based in Berwyn, Pennsylvania, is an investment firm that manages more than $25 billion in stocks in separately managed accounts and mutual funds for institutions and individuals, as of March 31, 2008.
As of May 31, 2008, Turner held in client accounts 246,630 shares of MasterCard, 1.1 million shares of Visa, and 4.5 million shares of eBay (parent company of PayPal).
Turner Investment Partners
Kate Patarcity, 484-329-2439
Fax: 484-329-2739
kpatarcity@turnerinvestments.com
