2014

The Zacks Analyst Blog Highlights:Visa, MasterCard, Global Payments, Target and Lululemon Athletica

CHICAGO, March 12, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Visa Inc. (NYSE: V-Free Report), MasterCard Incorporated (NYSE: MA-Free Report), Global Payments Inc. (NYSE: GPN-Free Report), Target Corp. (NYSE: TGT-Free Report) and Lululemon Athletica Inc. (Nasdaq: LULU-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Tuesday's Analyst Blog:

Visa, Mastercard Unite to Check Data Breach

Although share prices remained almost constant for Visa Inc. (NYSE: V-Free Report) and MasterCard Incorporated (NYSE: MA-Free Report), no one can deny the importance of the major news at present in the payment processing space– the collaboration of these two industry bigwigs. In the realm of data breaches, both the entities through their collaboration are resorting to enhanced technologies to improve card payment security.

There have been quite a number of data breaches in the recent times that have affected millions of people. Recalling 2012, almost every industry, be it banking or insurance or government departments and not to forget the security companies (that is an irony as they aim to protect against such attacks) have fallen victim to hacking or data breaching.

The credit card industry has also faced such scams. How can anyone forget about the breach at another industry leading payment processor, Global Payments Inc. (NYSE: GPN-Free Report) last year that raised consumer concerns about identity theft? As per a Wall Street Journal report, although Global Payments declined to disclose the type of data that had been accessed or even the number of cards that were at risk, investigators anticipated that the number could be hundreds of thousands. The most high-profile case in this regard was the card data theft at Target Corp. (NYSE: TGT-Free Report) where almost 40 million debit and credit card records were stolen.

Such frauds have impelled Visa and MasterCard to collectively address the issue and come up with a solution that would enhance payment security and conform to customer expectations.  Thus, to counter such scams, Visa and MasterCard are forming a new cross-industry group that would emphasize on the EMV chip technology adoption in the U.S. and concentrate on tokenization, point-to-point encryption and other online and mobile channel security-related requirements. The group will comprise banks, credit unions, acquirers, retailers, point-of-sale device manufacturers and industry trade groups.

Management of Visa is of the opinion that it is not in the hands of a single industry to solve payment system frauds, particularly, in the face of an increased shift towards the plastic mode of payment. The formation of this cross-industry group by Visa and MasterCard serves as a platform in this regard where multiple industries and technologies can come forward to share ideas and encourage the use of advanced technologies for combating payment frauds and generate superior security solutions.

As per Reuters, MasterCard and Visa have set Oct 2015 as the deadline for U.S. retailers to adopt the new payment technology. Earlier, the U.S retailers' customers were lacking the protection that is enjoyed by consumers across 80 countries who have a chip and PIN securing their credit and debit cards. With the aforementioned deal, MasterCard and Visa aims to bring in this protection to the U.S. card users. Being one of the pioneers in introducing these security solutions in the U.S., both the companies are expected to secure confidence of its existing customers as well as those who were skeptical regarding card security. This in turn should help both Visa and MasterCard to generate higher volumes thereby boosting sales.

Visa and MasterCard both carry a Zacks Rank #3 (Hold). However, Global Payments, with a Zacks Rank #2 (Buy), is a better-ranked stock in the same sector.

Lululemon Continues Battling Headwinds

Shares of Lululemon Athletica Inc. (Nasdaq: LULU-Free Report) tanked 18.7% since it posted its third quarter fiscal 2013 results on Dec 12, 2013.

Lululemon has been in troubled waters since Mar 2013 when the company was forced to recall its Black Luon yoga pants and crops from its stores and e-Commerce site due to quality related issues. This created a lot of buzz, which coupled with controversial comments from Lululemon's founder that hurt the sentiments of its women customers, led to lower traffic trends in the company's stores throughout 2013, thus, impacting the overall results.

Moreover, sales of Lululemon have been declining since the beginning of this year due to the impact of the polar vortex, which severely impacted regions with a significant number of Lululemon stores. This compelled management to trim its sales and earnings outlook for the fourth quarter of fiscal 2013.

The company now projects fourth-quarter revenues in the range of $513–$518 million compared to the previous forecast of $535–$540 million. Revenue forecast is based on constant-dollar comparable store sales (comps) decline in the low-to-mid single-digits range, against the prior projection of flat comps.

As a result, the company has lowered its earnings per share guidance to range from 71–73 cents a share, while it earlier anticipated earnings of $0.78–$0.80 per share. The current Zacks Consensus Estimate for the fourth quarter is pegged at 72 cents a share, falling within the company's range.

Taking a cue from the company's warning of weakened results in the upcoming fourth quarter, the Zacks Consensus Estimate for Lululemon has been witnessing a downtrend, as over the last 90 days estimates have declined 3.6% to $1.89 for fiscal 2014 and 11.6% to $2.20 for fiscal 2015.

Apart from these headwinds, the company is struggling to save its market share from competitors which are foraying into the activewear product line. Nevertheless, Lululemon is encouraged to see that the investments to strengthen and enhance its back-end product operations structure are starting to pay off. While the company believes that the full realization of these benefits is still a long way, it continues to stringently focus on the successful execution of its long-term strategic plans.

Lululemon currently holds a Zacks Rank #4 (Sell).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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