MasterCard Surges 10%

123jump.com Staff
04 Nov, 2008
New York City

MasterCard reported third quarter revenue rise of 24% and a loss of $1.49 a share or $193.6 million. After excluding one-time charges the company reported net income of $2.47 a share and guided that it is likely to miss its earnings revenue target in the next year.

[R]10:25 a.m. New York – MasterCard surges after it reported better than expected core earnings.[/R]

MasterCard ((MA)) surged 11% after it reported third quarter revenue rise of 24% to $1.3 billion and net loss of $1.49 a share or $193.6 million compared to gain of $314.5 million or $2.31 a share.

Excluding after-tax legal settlement charge of $515.5 million with Discover Financial Services, the profit in the quarter was $332 million or $2.47 a share.

The company took a pre-tax charge of $827.5 million related to Discover Financial Services anti-trust legal settlement.

The stock surged to as high as $162.55 but settled up 10.4% to $158.

In an interview with Bloomberg News chief executive Robert W Selander of MasterCard said the company is not likely to meet its revenue and earnings growth target for 2009 and cited recent strength in the U.S. dollar, a decline in economic conditions and weak consumer spending. MasterCard earlier had guided earnings rise between 20% and 30% and revenue gain of between 12% and 15% for the next three years.

In the earning release, Selander noted, “As we are not immune from the long-term effects of the current economic environment, we have significantly accelerated the focus on our cost structure.”

MasterCard and Visa are likely beneficiary of the gradual migration of consumer spending through electronic networks rather than cash and checks. The worldwide trend of electronic payment is only now reaching many nations in Asia and Latin America. In India, credit card purchased tripled in the last five years.

Gross dollar volume, measured in local currency rose 12.3% to $662 billion and number of transaction rose 13% to 5.4 billion in the quarter. Cross border transaction increased 18% and price increase added 5% to the net revenue rise.

At the end of the quarter number of MasterCard holders rose 10.3% to 970 million issued by banks and other institutions.

For the nine months, MasterCard reported net income of $1 billion of $7.59 a share excluding special charges and $3.79 including special charges of $493 million. Net revenues in the nine months rose 25.8% to $3.8 billion. Currency fluctuation added 4.6% revenue from a year ago and price increase for cross border transaction contributed 5% rise in revenue.

Special charges for the nine months included pre-tax charge of $1.65 billion related to American Express anti-trust litigation and $827.5 million related to Discover Financial.