MasterCard up 15% on Strong Profit

Elena
01 Nov, 2006
New York City

Better-than-expected earnings from MasterCard and an upbeat forecast for private-sector employment in October pushed stock higher at opening. MasterCard reported 82% profit jump in Q3 to $1.42 a share from 79 cents last year, due to an improved revenue and a higher number of purchases worldwide. Deal talks about a combination of pharmacy benefits manager Caremark Rx and drugstore chain CVS Corp. also contributed to the upside move.

[R]9:45AM Market opened up on MasterCard earnings and jobs forecast.[/R]
Better-than-expected earnings from MasterCard Inc. and an upbeat forecast for private-sector employment in October generated positive sentiment in early Wednesday trading. ADP-Macroeconomic Advisers said it anticipates a 128,000 more private-sector jobs when the Labor Department reports payroll figures Friday. Deal talks about a combination of pharmacy benefits manager Caremark Rx Inc. ((CMS)) and drugstore chain CVS Corp. ((CVS)) also contributed to the upside move after two lackluster sessions. A deal is likely to be worth more than $21 billion.

MasterCard Inc. ((MA)), owner of the nation''s second-largest credit card brand, reported 82% profit jump in Q3, due to an improved revenue and a higher number of purchases worldwide. The company earned $1.42 per share, up from 79 cents a share, a year earlier when MasterCard was a private entity owned by the nation''s largest banks. Revenue rose 13.9% to $902 million from $791.6 million a year ago. The quarterly results exceeded expectations of $1.07 in earnings per share on $871.2 million in revenue. Company's shares surged 16%.

In early trading, the gold sector showed significant strength as the price of gold climbed back. Health insurance stocks also posted some early strength, with Cigna ((CI)) helping to lead the sector higher, up 5.9% after reporting strong Q3 earnings and forecasting full year earnings above analyst estimates. In early trading, the Dow Jones industrial average rose 35.38, or 0.29%, to 12,117.31. The Standard & Poor's 500 index rose 3.58, or 0.26%, to 1,381.52, and the Nasdaq composite index rose 6.51, or 0.28%, to 2,373.22. Bonds were flat, with the yield on the 10-year Treasury note at 4.61%.


[R]9:30AM The FTSE 100 advances by lunchtine Wednesday on miners.[/R]
The FTSE 100 in London extended its early gains to trade 22 points, or 0.4%, higher at 6,151.2.

Advancers

Cairn Energy unveiled plans to raise about $1.8 billion from the sale of 30.5% of its Indian operations. The proceeds will be used to fund ongoing operations but some will also be returned to shareholders. The oil exploration company rose 1.4%.

Xstrata rose 2.8% while Lonmin added 2.4%. BHP Billiton was 2.1% higher while Rio Tinto rose 1.4% with Vedanta Resources up 0.3%.

St James Place Capital gained 4.3% after the wealth manager said total new business rose 58% in the first nine months of the year compared to the same period last year.

Among the mid-caps, the tour operator MyTravel rose 0.3% after it confirmed its expectations to return to profit this year despite a 9.5% fall in winter holiday bookings.

Decliners

Tate & Lyle fell 1.2% as the sugar and sweetner maker cautioned that profit growth in the second half was likely to be lower than in the first six months of the year due to the impact of EU sugar reform and higher European cereal prices.

International Power announced the acquisition of a portfolio of wind farms in Germany and France with an enterprise value of 379 million pounds from Christofferson Robb & Co. International Power dipped 0.7%.

Morgan Stanley downgraded Smirnoff-owner Diageo to equal-weight as part of a wider note on the drinks sector, arguing that the potential for any upgrades are limited relative to peers in the sector. Diageo lost 0.15%.

Other news

Strong domestic demand helped the UK manufacturing sector deliver its fifteenth successive month of expansion, a trend that has encouraged producers to continue raising prices at the factory gate, a report released on Wednesday showed. The latest survey produced by the Chartered Institute of Purchasing and Supply and the Royal Bank of Scotland showed its index of manufacturing activity at 53.7 in October.


[R]9:00AM Stock futures turned higher on employment data.[/R]
U.S. stock market futures turned higher after a survey report showed that the U.S. economy added about 128,000 private-sector jobs in October, a modest rebound in employment, according to the monthly ADP employment report released Wednesday. Automakers are also expected to report higher October U.S. sales compared to the same month a year ago.

On the earnings news front, Time Warner Inc. ((TWX)), the world''s largest media conglomerate, posted sharply higher Q3 earnings of 57 cents a share, up from 18 cents last year due to several asset sales and adjustments related to its deal to acquire cable systems from Adelphia. Revenues rose 7% to $10.9 billion from $10.2 billion. However, profit and revenue came in slightly below estimates. Time Warner held to its 2006 outlook. The stock dropped 1.45% in pre-market trading. Burger King Holdings Inc. ((BKC)), the world''s second-largest burger chain, reported Q1 earnings jump of 82% to 30 cents per share from 19 cents per share a year ago on sales increase. Revenue rose 8% to $546 million. Quarterly results beat expectations of a profit of 26 cents per share on revenue of $538.1 million. Insurer Cigna ((CI)) reported a 15% profit increase and lifted its 2006 earnings outlook.

In merger-and-acquisition news, CVS ((CVS)), the second largest drugstore chain in the U.S., confirmed that it is in merger talks with Caremark Rx ((CMS)), a leading pharmacy benefits manager. S&P 500 futures were up 3.70 points, above fair value. Dow Jones industrial average futures rose 36 points, and Nasdaq 100 futures were up 6.25 points.


[R]8:00AM R.R. Donnelly & Sons agreed to buy Banta for $1.3 billion.[/R]
R.R. Donnelley & Sons Co. announced late Tuesday it will acquire Banta Corp. in a deal worth $1.3 billion. The cash deal is valued at about $1.3 billion, or $36.50 per share after a special dividend of $16.00 per share already declared by Banta. The offer, equal to $52.50 per share, represents a premium of 18.6% over Banta''s closing share price Tuesday on the Nymex of $44.28. The deal was unanimously approved by boards of directors of the two companies. The transaction is expected to complete in Q1 of 2007.

Chicago-based R.R. Donnelley, which prints the Yellow Pages, said the acquisition will allow it to expand its range of products and services for customers and also enhance its services in magazine, catalog and book printing and in direct marketing. R.R. Donnelley has 47,000 employees worldwide and had 2005 revenues of $8.43 billion.

Banta, based in Menasha, Wis., has operations in the United States, Europe and Asia. It produces books and provides supply chain management services. Banta, with 1,585 employees in Wisconsin''s Fox Valley and 8,000 worldwide, reported 2005 revenues of $1.54 billion. Banta said in September that it would declare a $16 per share special dividend payable in November.


[R]7:30AM Asian stocks advance broadly Wednesday, South Korea, Singapore lead.[/R]
Asian markets ended mostly higher on Wednesday. Nikkei 225 Index in Japan ended 0.2% lower to 16375.26. Gains in the yen weighed down Japanese export-oriented shares, leaving Toyota Motor flat. Honda fell 0.2%. Shares of Nissan Motors bucked the downtrend to finish up 3.4%.

The banking sector in Tokyo closed mixed with Mitsubishi UFJ, largest bank by assets in Japan, up 1.4%, while Softbank, which acquired the Japanese mobile cellular business of Vodafone Group PLC earlier this year, plunged 4.9%.

The Kospi index in South Korea rose 0.7% and Taiwan Weighted Price Index fell 0.1%. Shares listed in Singapore advanced, with the benchmark Straits Times Index advancing 0.9%. Hang Seng Index in Hong Kong ended 0.7% higher at 18,453.65. The China Enterprises Index of shares listed in Hong Kong, added 1.1% to 7,568.19.

Australia S&P/ASX 200 rose 0.6% to close at a record 5416.40, lifted by gains in mining and banking shares. National Australia Bank edged higher 0.9% on upbeat expectations ahead of results due Friday. Shares of BHP Billiton gained 0.9%.


[R]6:30AM Strong metal shares and banking mergers help Europe higher Wednesday.[/R]
European markets were marginally higher in early trading on Wednesday. The FTSE 100 in London gained 0.2% to 6,138.4, Frankfurt Xetra Dax climbed fractionally to 6,270.62, and the CAC 40 in Paris was flat at 5,348.88.

Advancers

Banks were among the best performing stocks after Banco Popolare di Verona e Novara and Banca Popolare Italiana, the two Italian co-operative banks, announced they had signed a memorandum of understanding. This confirms the structure of the new bank, as well as the terms and conditions of the planned merger. Shares in BPVN gained 2.7% and BPI added 2%.

Natexis Banques Populaire, the French mutual lender, gained 2%. It is merging its Natexis investment banking unit with Ixis, the wealth management division of Caisse d’Epargne. Nordic banks were also performing well, with Swedbank up 1.5%, and DnB Nor 1% higher.

Metal stocks were also in demand after zinc prices touched record highs and as gold prices also strengthened. BHP Billiton and Rio Tinto gained more than 1.1%

Telecoms advanced again after TeliaSonera, which reported on Tuesday forecast-beating third-quarter numbers, gained 0.5% following target price upgrades from Morgan Stanley, Deutsche Bank and UBS. Greek mobile group Cosmote gained 1.5%, while Vodafone added 0.6%.

Decliners

Telenor bucked the telecoms trend, retreating from some of its recent gains that followed strong third-quarter results, falling 1.5%.

Tyre makers led the decliners on Wednesday, as Continental, the German tyre and car parts maker, fell 0.8% after it reported a fall in third-quarter core operating profit as raw materials costs mounted and auto industry production in the US stalled. Michelin also fell 1.1%.

Oil and gold

Crude oil for December delivery fell 47 cents, or 0.8%, to $58.26 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Brent crude oil for December declined 41 cents to $58.62 a barrel on the ICE Futures exchange in London.

Gold prices rose for a seventh consecutive trading session in London amid concern about a slowdown in the U.S. economy. Gold for immediate delivery in London rose $5.40, or 0.9%, to $612 an ounce.

Currencies

The U.S. dollar was little changed before a U.S. report on manufacturing growth today. The greenback traded at 117.04 yen. in London from 116.98 yen in New York late yesterday. It was at $1.2755 per euro from $1.2762 on Tuesday. The British pound traded at $1.9095 against the dollar from $1.9081 yesterday.