Bloomberg News

MasterCard Net Beats Estimates as Customers Use More Plastic

February 03, 2012

(Updates share price in third paragraph.)

Feb. 2 (Bloomberg) -- MasterCard Inc., the world’s second- biggest payments network, said fourth-quarter profit climbed 24 percent as spending with credit and debit cards increased. The shares rose the most in three months.

Net income increased to $514 million, or $4.03 a share, from $415 million, or $3.17, a year earlier, the Purchase, New York-based company said today in a statement. The average estimate of 32 analysts surveyed by Bloomberg was $3.91 a share. MasterCard took a $495 million charge related to price-fixing litigation.

MasterCard advanced 7 percent to $381.57 in New York, the most since Nov. 2. The results cap a year in which MasterCard, led by Chief Executive Officer Ajay Banga, surged 66 percent, the fourth-best performance in the Standard & Poor’s 500 Index. The firm repurchased stock as the global shift from cash and checks to electronic payments continued.

“We are seeing sustained momentum driven by new deals and the ongoing shift away from paper-based payments,” Banga, 52, said in the statement.

MasterCard shares gained in part because the company predicted that revenue would increase in 2012 and 2013 at a compound annual growth rate of 12 percent to 14 percent, David Koning, an analyst with R.W. Baird & Co, wrote in a note to clients today. MasterCard also said it wants to increase earnings per share by more than 20 percent during the same period, he said.

Anitrust Suit

MasterCard’s charge represents the company’s portion of a potential settlement of an antitrust suit over how much banks charge merchants to process transactions, according to the statement.

In November, MasterCard and Visa Inc., the world’s largest payments network, put any potential settlement at about $4 billion. The two companies agreed that San Francisco-based Visa would be responsible for two-thirds of any settlement and MasterCard would be responsible for about one-eighth.

“With these kinds of negotiations, you do not know when the thing gets settled,” Chief Financial Officer Martina Hund- Mejean said today in a phone interview. “We’re already in the sixth year of this thing. I really would be lying if I gave you any kind of timing on this.”

Fourth-quarter spending on MasterCard debit cards in the U.S. increased 18 percent to $139 billion from a year earlier, and U.S. credit-card spending rose 6.6 percent to $143 billion, according to the statement. Debit-card spending climbed 21 percent worldwide, while global credit-card spending was up 14 percent.

Global Spending

Worldwide spending on MasterCard- and Maestro-branded cards, adjusted for currency fluctuations, increased 16 percent to $863 billion, the company said. Spending by consumers outside their home countries climbed 18 percent. Processed transactions gained 23 percent to 7.7 billion.

MasterCard’s total profit for 2011, including the after-tax charge, increased 3.3 percent to $1.91 billion, according to the statement. Revenue climbed 21 percent to $6.71 billion. Net revenue during the three months ended Dec. 31 increased 20 percent to $1.7 billion. Operating expenses climbed 12 percent to $968 million, excluding the charge, MasterCard said.

“It was a combination of a lot of things that sort of made them like the perfect stock” in 2011, Donald Fandetti, a Citigroup Inc. analyst in New York, said before the results were announced. “You had a company that was beating numbers, a very strong capital return story with share purchases and you had a world where investors weren’t fully comfortable with some of the alternatives.”

Fandetti, who has a “neutral” rating on the stock, predicted MasterCard would report earnings per share of $4.10.

Visa is scheduled to report fiscal first-quarter results on Feb. 8.

--Editors: William Ahearn, Rick Green

To contact the reporters on this story: Donal Griffin in New York at Dgriffin10@bloomberg.net;

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.


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