Consumer spending lifts MasterCard profit 63%
Results boosted by gain on partial RedeCard sale; stock rises
By
Greg Morcroft &
John Spence, MarketWatch
Last Update: 3:47 PM ET Oct 31, 2007
NEW YORK (MarketWatch) -- Shares of MasterCard rose more than 20% late Wednesday after the credit card giant said third-quarter net income jumped 63% due in part to an asset sale and higher consumer spending.
MasterCard's quarterly profit rose to $314.5 million, or $2.31 a share, from $193 million, or $1.42 a share in the year-ago period.
Results from the latest quarter include after-tax gains of 51 cents a share from the sale of 25% of its investment in Redecard S.A. of Brazil. The market value of MasterCard's remaining RedeCard shares was $381 million at quarter-end.
The Purchase, N.Y.-based company said revenue climbed 20% to $1.08 billion from $902 million, as the company's gross dollar volume, or spending on MasterCard-branded cards, rose 12.8% to $577 billion. The latest quarter was the first time the company delivered more than $1 billion in revenue, said Chief Executive Robert Selander.
Analysts surveyed by Thomson Financial expected earnings of $1.42 a share on revenue of $1.03 billion.
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MA) shares were up more than 21% to $190.25 at last check in late-afternoon trading.
Growth in foreign markets
"Starting in the U.S., our volume growth has far exceeded retail sales growth to date in 2007. While we cannot control or predict the future of the overall U.S. economy, we expect our results to trend above typical market indicators during difficult economic climates," the CEO said during the conference call with analysts.
"Clearly, since MasterCard does not have exposure to consumer credit receivables, we may not benefit from the upside when credit trends are favorable, but we also do not suffer the down side during tough times," Selander said. "Meanwhile, we continue to see markets outside of the U.S. driving significant growth for the company," he added.
MasterCard's board has approved an additional $750 million under its stock-repurchase plan, taking the total repurchase program since the initial public offering to $1.25 billion. It plans to buy the additional $750 million of stock by June 30, 2008.
Worldwide purchase volume rose 14.1% to $430 billion.
MasterCard processed 4.8 billion transactions in the latest quarter, up 13% from a year ago, while the company's customers issued 878 million branded cards as of Sept. 30.
Total operating expenses rose 16% to $730 million. The company said currency movements contributed about 2.3% of the increase in revenue in the third quarter.
"While the possibility of a U.S. slowdown with U.S. consumer spending associated with subprime mortgage issues is yet to be considered, the global diversification of our business results and MasterCard's ability to generate significant volume in revenue from non-U.S. economies remains very strong," said Chief Financial Officer Chris McWilton during Wednesday's call.
"History demonstrates that we've been very resilient in weathering macro economic events," the CFO said. "The secular shift from paper to electronic forms of payment continues in spite of any local economic downturn. While the broader U.S. economy is undergoing some challenges, we are on an excellent trajectory, we continue to demonstrate global strength."
Wall Street applauds results
"Results continue to reflect the global growth in debit and credit card spending and the company's operating leverage," wrote analysts at Bear Stearns in a research note Wednesday.
"While currency continued to provide a lift this quarter, we are encouraged by the strong revenue growth even excluding currency, demonstrating solid fundamentals and momentum in international markets," added Goldman Sachs in a report to clients. "Expense control was also impressive."
"Overall, MasterCard reported strong results for the quarter, which we believe is encouraging given concerns pertaining to consumer spending," according to analysts at KeyBanc Capital Markets. "We would like to reiterate that MasterCard is a beneficiary of greater cross-border travel, which we believe remains healthy, and is not highly dependent on U.S. consumer spending."
Greg Morcroft is MarketWatch's financial editor in New York.
John Spence is a reporter for MarketWatch in Boston.
hno: consumer confidence, as an index, is going to fluctuate from day to day or week to week, just like the DJIA or any other index. It's also a reflection of more subjective concerns or even the news of the day.
uke1:
