MasterCard Shows Better Than Expected Earnings
There was some good news for a change in the credit markets to report. MasterCard surprised Wall Street by exceeding analysts earnings estimates. It would seem that the economy is in fact improving, although it looks like a jobless recovery.
MasterCard’s third-quarter profit shows that the world’s second-largest payments network is benefiting from more and more consumers turning to plastic. CEO Robert Selander said in a statement, “Our results once again underscore the global trend toward electronic payments.”
Both MasterCard and Visa have been the beneficiaries of the growing number of electronic payments. It must be pointed out that these two kings of the payment processing universe are different than bank issued cards because they do not give loans.
They make their money being the middleman by processing each and every payment. An enviable position to be in indeed. Credit card issuers such as Chase, Bank of America, Citibank, etc., make their money on interest rates and fees.
By the Numbers
MasterCard reported that net income was $452.2 million, or $3.45 a diluted share. That is a much stronger showing than a year ago when they had a loss of $193.6 million, $1.48 per share. It must be stated however, that the numbers from last year were deeply skewed because of a large settlement payment that was made.
A year ago both MasterCard and Visa paid out a substantial amount of money to settle with Discover Financial Services who charged the two processing giants with, in effect, blacklisting their cards from many banks. For their part MasterCard ponied up $515.5 million to settle the suit.
MasterCard processed 5.8 billion transactions during the quarter and that’s up 7.6%. Revenue also grew by 2% to $1.36 billion. Previously analysts had them pegged at $1.35 billion.
Ironically shares of MasterCard fell $9.24, or 4.1% when the earnings were reported. You can chalk that up to the old Wall Street axiom, ‘buy the rumor, sell the fact.’ MasterCard shares are up 56% year-to-date. Pretty impressive considering the economy.
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