Upward Revision on GDP, MasterCard Surges 12%

123jump.com Staff
29 May, 2008
New York City

The U.S. economic growth in the first quarter was revised upwards to 0.9% from 0.6% on shrinking trade deficit. The upward revision follows the 0.6% rise in economic growth of 0.6% in the fourth quarter. In addition, the weekly unemployment claims rose at the end of the last week. Costco reported better than expected earnings and Sears swung to a quarterly loss. MasterCard surged after lifting its revenue and earnings guidance.

[R]11:25AM New York – U.S. economy grew at a faster pace in the first quarter and weekly unemployment claims rose.[/R]

Economy in the first quarter rose at a faster pace, unemployment claims rises

The final read on the first quarter economic growth was revised upward to 0.9% from the initial estimate of 0.6% according to the revised data released by the Commerce Department. The economy grew at 0.6% in the fourth quarter. The larger than expected decline in the trade deficit helped the economic growth. In the first quarter the trade deficit fell to annualized rate of $480 billion from annual rate of $650 billion in 2007. The shrink in the rate of the deficit contributed to the rise in the gross domestic product.

Separately the Labor Department reported initial claims at the end of the last week rose to 372,000 compared to 368,000 a week ago.

Earnings at Sears and Costco reflected general trend in the economy as more shopper look for bargains. Sears swung to a loss as it battles a loss of customers to Target and discount stores like Wal-Mart and Costco. On the other hand, Costco sales and earnings increased as more members joined the warehouse club.

Costco Wholesale Corporation reported third quarter sales increased 13% to $16.26 billion from $14.3 billion a year ago. Excluding sales returns reserves of $228.2 million, the sales would have increased 12%. Net income in the quarter rose 31% to $295 million from $223.98 million a year ago.

Earnings per share in the quarter rose to 67 cents from 49 cents.

Comparable sales in the third quarter rose 6% at the U.S. locations and rose at 16% at the international locations. Overall comparable sales rose at 8%. Membership fees collected in the quarter rose to $350.9 million from $317.7 million in the same quarter a year ago.

Costco ((COST)) in the morning trading rose $1.68 to $74.24.

Sears Holdings Corporations reported first quarter sales declined to $11.07 billion from $11.75 billion in the same quarter a year ago. In the quarter Sears swung to a loss of $56 million or 43 cents per share compared to net income of $223 million or $1.45 per share.

Comparable sales at domestic locations of Sears fell 9.8% and at Kmart declined 7.1%. Total domestic same store sales fell 8.6%. Net cash on hand at the end of the quarter fell to $1.4 billion compared to $3.5 billion at May 5, 2007 and $1.6 billion at February 2, 2008.

Sears stock ((SHLD)) fell 9 cents to $87.00.


Master Card surged after it revised its revenue and earnings projections for the long term in a presentation to investors and filed with the SEC in a regulatory filing. The company now expects long term revenue growth to be between 12% and 15% and average annual earnings growth between 20% and 30%. Operating margins are expected to improve between 3% and 5%. The assumptions estimate constant currency rates and net effective tax rate of 35%.

The presentation also noted that the gross domestic volume growth in the domestic market but are higher in the rest of the world resulting in a ‘slightly higher’ gross volume.

Master Card stock ((MA)) surged 12% or $33.67 to $312.51.