Ahead of the Bell: Credit card processors upgraded

posted: 43 DAYS 14 HOURS AGO

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NEW YORK -Increased use of credit and debit cards should translate into improved revenue for payment processors MasterCard Inc. and Visa Inc., an analyst said Monday as he lifted his ratings on both of the stocks.

Credit Suisse analyst Moshe Orenbuch raised his rating on both stocks to "Outperform" from "Neutral." Orenbuch increased his price target on MasterCard to $255 from $210. He raised his price target on Visa to $84 from $70.

Visa shares rose $1.51, or 2 percent, to $74.45 in premarket trading. MasterCard stock gained $4.14, or 2 percent to $218.56.

Improving spending volumes and a general trend toward using plastic instead of cash to pay for goods and services should improve revenue growth in the coming quarters and translate into higher stock prices, Orenbuch wrote in a research note.

Credit and debit cards account for about 44 percent of all payments in the U.S., and that is expected to increase in the coming years, Orenbuch said. Debit card transactions are growing faster than credit purchases amid the economic downturn, which should help Visa more than MasterCard because of its larger network of debit cards, Orenbuch wrote in the note.

Credit and debit card volume growth will expand "several percentage points per year faster than global GDP as plastic continues to take share of global payments from cash and checks," Orenbuch wrote in the note. Visa and MasterCard are the two largest electronic payments processors in the world.

Orenbuch increased his 2010 earnings estimate for MasterCard by 30 cents per share to $12.65 per share. He established a 2011 earnings estimate of $15 per share.

Analysts polled by Thomson Reuters, on average, forecast earnings of $12.93 per share in 2010 and $15.45 per share in 2011.

Orenbuch predicts Visa will earn $3.50 per share in 2010. He established a fiscal 2011 earnings estimate of $4.15 per share.

Analysts expect earnings of $3.43 per share in 2010 and $4.01 per share in 2011.

2009-10-12 09:24:19