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Earnings Preview: Visa Inc (V) and MasterCard Inc (MA)

Ahead of earnings, V and MA find themselves on opposite sides of the trading fence

by 4/30/2013 9:32 AM
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With earnings season in full swing, two well-known credit card companies -- Visa Inc (NYSE:V) and MasterCard Inc (NYSE:MA) -- are due to report quarterly results this Wednesday. Here's brief review of each stock's respective sentiment backdrop as these firms head into the earnings confessional this week.

V has put forth a solid technical performance lately, gaining nearly 11% year-to-date, and more than 36% on a year-over-year basis. In fact, the shares tagged a new record peak of $170.99 on April 1, following a price-target hike at Jefferies. Furthermore, a look at the charts shows that the equity -- presently perched at $167.90 -- continues to trade atop its ascending 20-week moving average, which has served as support for more than a year.

Not surprisingly, calls have been the options of choice on Visa Inc. lately, particularly within the near-term crowd. The equity's Schaeffer's put/call open interest ratio (SOIR) checks in at 0.97, with calls slightly outpacing puts among options slated to expire within the next three months. This ratio ranks in just the 10th percentile of its annual range, meaning short-term traders have rarely been more call-heavy toward the stock during the past year.

The company will report fiscal second-quarter earnings after the market closes on May 1, and has trumped consensus bottom-line estimates in each of the past eight quarters. On average, the stock has traded 0.8% higher the week after posting earnings results. Currently, analysts are expecting a profit of $1.81 per share.

Sector peer MA has also fared well on the technical front, sporting a 2013 advance of nearly 10%, and a 12-month surge of about 19%, to trade at $539.01. What's more, the equity claimed its own all-time high of $546.90 on April 1, as well, courtesy of an upward price-target adjustment at Jefferies. Meanwhile, the shares are perched well above their 40-week moving average -- a trendline not breached on a weekly closing basis since December 2010.

However, in stark contrast to V, trader sentiment toward MA is decidedly bearish. The stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio sits at 1.41, confirming puts bought to open have outnumbered calls during the past two weeks. This ratio registers higher than 95% of similar annual readings, signaling speculators have been snatching up puts over calls at a near annual-high pace.

As previously noted, MasterCard Inc is on tap reveal first-quarter earnings ahead of Wednesday's open, and like V, is eight-for-eight in exceeding analysts' per-share projections. However, MA was trending an average of 3.2% higher the week after posting earnings results, which is interesting, given the skepticism surrounding the stock. For the first quarter, analysts are expecting a per-share profit of $6.18.


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