Tuesday, February 1, 2011

MasterCard Incorporated (NYSE: MA): Q4 Earnings Preview 2010

MasterCard Incorporated (NYSE: MA) is scheduled to release its fourth-quarter financial results before the market open on Thursday, February 3, 2011. Analysts, on average, expect the company to report earnings of $3.04 per share on revenue of $1.42 billion. In the year ago quarter, the company reported earnings of $2.24 per share on revenue of $1.30 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 third quarter, the Purchase, New York-based company's net income was $518 million, or $3.94, compared to $452 million, or $3.45 per share, in the year-ago quarter. Revenue grew 4.7% to $1.42 billion from $1.36 billion. Analysts, on average, expected the company to report earnings of $3.54 per share on revenue of $1.41 billion. 

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.

The company is cultivating new business in emerging markets. Expanding its presence in high-growth China, MasterCard plans to enhance its partnership with China UnionPay, the state-owned company, which has the monopoly on issuing credit cards in the country, for exploring business opportunities together. . China UnionPay is the sole bank card transaction processing company in the region.UnionPay is the biggest card company globally in terms of card issuance and the second largest brand in the Asia-Pacific region in terms of transaction volume, thereby beating the oldest and globally renowned competitors such as Visa Inc. (NYSE: V).

In an effort to expand its international business, MasterCard recently obtained the naming rights of Wukesong Arena in Beijing for a five-year period. MasterCard derives nearly 60% of its revenue from overseas

The company has relatively few opportunities for growth in the United States, where rival Visa dominates the debit processing market and most consumers already use credit and debit cards. Moreover, uncertainty stemming from financial overhaul, which includes curbs on debit-card transaction fees, has taken some shine off MasterCard's shares.  Last month, the Federal Reserve proposed capping fees banks can charge merchants for debit-card transactions at 12 cents. While that directly affects bank revenues from debit cards, the banks could try to get Visa and MasterCard to lower their fees to use their networks in order to offset the revenue loss. Final recommendations on the proposal are set to be issued in April.

Full Disclosure: None.
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