DFS Discover Financial Services

For Immediate Release

Chicago, IL – December 2, 2011 – 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 Visa Inc. (V), MasterCard Inc. (MA), American Express Co. (AXP), Discover Financial Services (DFS) and Caterpillar Inc. (CAT).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Thursday’s Analyst Blog:

Debit Fee Rule Makes Visa Restless

Visa Inc. (V) appears to have tried out every means to delay the implementation of the debit-fee ruling finalized in June this year, due to which the company’s lobbying charges increased substantially during the third quarter of 2011.

However, Visa’s close rival, MasterCard Inc. (MA) is apparently more relaxed about regulatory issues having witnessed a significant decline in its third quarter lobbying charges. Other card players such as American Express Co. (AXP) and Discover Financial Services (DFS) are yet to reveal their lobbying data.

Early this week, according to a disclosure report, Visa and MasterCard reportedly spent $1.69 million and $0.58 million, respectively, in the third quarter of 2011. While lobbying costs for Visa jumped 54% year over year and 17% sequentially, the same for MasterCard plummeted 31% from $0.84 million in the year-ago quarter and 25% from $0.77 million reported in the sequential quarter.

In the July-September period of 2011, Visa and MasterCard took the federal government into confidence regarding the regulation of consumer financial products, interchange fees, online payments, data security, and internet gambling among other issues. Overall, the companies lobbied the Congress, the White House and the Treasury Department.

While both the card giants lobbied the federal government on multiple issues, the most primary one was the recent reduction on interchange fees charged on debit card transactions.

The Dodd-Frank Act signed in July 2010 limited the interchange fees that card issuers charge merchants for using the card, which constitute a major component of card issuers' revenues. These issues have been unsettling the card giants, thereby compelling them to lobby against them.

Furthermore, after months of discussions, the Federal Reserve (Fed) capped the interchange fee at 21 cents per debit transaction in July this year, drastically down from the average of 44 cents. This reduction will hamper revenues of the banks, which in turn will affect the card companies as banks would now try to trim the fee they pay to use the respective card networks.

Moreover, despite several initiatives to delay or modify this fee-ceiling, the ruling has been implemented effective October 1, 2011, thereby indicating caution on these card giants. The debit-fee cap has particularly hit Visa very hard since most of its revenue is generated from the debit card business. The company processes the largest number of debit transactions in the US, well ahead of MasterCard.

Though the new rules will protect credit card users from unreasonable late payment fees, interest rate hikes and other penalty fees, they could even adversely affect the profitability of these major card issuers.

As a result of execution of the rule, Visa’s growth is expected to slow down in fiscal 2012, which is also reflected from its top-line growth guidance in high single-digit to low double-digits range and bottom-line growth in the middle-to-high teens. However, MasterCard would not go unscathed, although its growth slump is not expected to be as severe as for its arch rival Visa.

Nevertheless, we believe that both card giants are fundamentally strong stocks and, are expected to deliver well with the market stability. Besides, the companies are also seeking greener pastures through newer initiatives, including the expansion into prepaid cards, mobile banking and eCommerce.

Caterpillar Grows Indian Connection

Caterpillar Inc. (CAT) is planning to invest $212 million in India to meet the increasing demand for its products due to road construction and overall infrastructure boom in the country.

The plan includes building a new $150 million engine manufacturing facility in India that will produce Perkins branded 4000 Series engines. The site selection for the facility is currently under progress. In addition, Caterpillar has slated $62 million for expansion of its existing off-highway truck manufacturing facility in Chennai.

Last year, Caterpillar had announced expansion plans to the tune of $108 million to double its truck capacity in Chennai. Caterpillar had then stated that it would invest $700 million over the next four years in a bid to start production of mining shovels and expand output of trucks at its Chennai and Illinois plants.

These facilities will cater to customers in India as well as other growth markets. The move adds to a growing list of investments that Caterpillar has made globally as part of its 2015 corporate strategy. In concert with this strategy, Caterpillar is aggressively investing to increase capacity for a wide range of products in key growth markets such as India and support customers in developed economies such as North America, Europe and Japan.

 Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5515.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leon Zacks. As a PhD from MIT Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Follow us on Twitter: http://twitter.com/zacksresearch

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
http://www.zacks.com

 
AMER EXPRESS CO (AXP): Free Stock Analysis Report
 
CATERPILLAR INC (CAT): Free Stock Analysis Report
 
DISCOVER FIN SV (DFS): Free Stock Analysis Report
 
MASTERCARD INC (MA): Free Stock Analysis Report
 
VISA INC-A (V): Free Stock Analysis Report
 
Zacks Investment Research