Saturday, May 1, 2010

MasterCard Inc. (NYSE: MA): Q1 Earnings Preview

MasterCard Incorporated (NYSE: MA) is scheduled to release its first-quarter financial results before the opening bell on Tuesday, May 4, 2010. Analysts, on average, currently expect the company to report earnings of $3.14 a share on revenue of $1.27 billion. In the year ago quarter, the company reported a earnings of $2.80 per share on revenue of $1.16 billion.

MasterCard Incorporated, together with its subsidiaries, provides transaction processing and related services to customers principally in support of their credit, deposit access, electronic cash and automated teller machine payment card programs, and travelers cheque programs.

In the preceding fourth quarter, the Purchase, New York-based company reported net income of $294.00 million or $2.24 per share for the fourth quarter, up from $239.44 million or $1.83 per share in the prior year quarter. On adjusted basis, the company earned $243 million or $1.85 per share in the fourth quarter 2009. Revenue grew 6% to $1.3 billion from $1.2 billion in the same quarter last year.

As of December 31, 2009, the company's customers had issued 966 million MasterCard cards, a decline of 1.3% over the cards issued at December 31, 2008.

MasterCard, like other payment solutions company, is benefiting from a broad trend away from cash and checks and toward electronic forms of payment. When purchases are made using debit and credit cards carrying the MasterCard logo, the company collects fees from each transaction. That makes the company's results sensitive to consumer spending. However, unlike credit-card companies, MasterCard doesn't lend money, so it wasn't hit hard by the credit crisis.

In the last four quarters, the company recorded EPS growth of 9%, 27%, 41% and finally 31% in the fourth quarter. However, a lack of revenue growth points to the fact that Mastercard manufactured the majority of its earnings growth through controlling expenses and not as a result of a material increase in the business. In fact, the last four quarters of revenue growth have been (2%), 3%, 2%, and 6%.

Looking ahead, MasterCard's performance will depend as always on consumer spending levels. On Friday, a government release showed that consumer spending grew at a 3.6% annual rate.

In terms of stock performance, MasterCard shares are down over 3% since the beginning of the year. Shares of the company closed at $248.04 on Friday.

Full Disclosure: None.
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