Tuesday, November 1, 2011

MasterCard Inc. (NYSE: MA): Q3 Earnings Preview 2011

MasterCard Inc. (NYSE: MA) is scheduled to release its third-quarter earnings before the opening bell on Wednesday, November 2, 2011. Analysts, on average, expect the company to report earnings of $4.82 per share on revenue of $3.94 billion. In the year ago quarter, the company reported earnings of $3.94 per share on revenue of $1.43 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 second-quarter, the Purchase, New York-based company's net income was $608 million, or $4.76 per share, compared to $458 million, or $3.49 per share, in the year-ago quarter. Revenue grew 22.1 percent to $1.67 billion from $1.37 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of $4.22 per share on revenue of $1.55 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. Moreover, the company is cultivating new business in emerging markets.

MasterCard, which has a very small share of the debit-card market today, has been working to increase that business in the face of new restrictions. The company recently won the debit-card portfolio of regional bank Huntington Bancshares Inc. (NASDAQ: HBAN). The portfolio includes about 1.5 million consumer and business debit cards.

The company is emphasizing products aimed at affluent consumers as well as emerging categories like prepaid cards and mobile payments in an effort to drive growth. The credit card company is trying to convert more of the world's transactions from cash and checks to electronic payments and capture a larger share of those transactions. Currently 85% of retail transactions worldwide are made with cash or check, providing MasterCard with a big opportunity to capture more volume with its credit, debit and prepaid cards.

The company has been putting a bigger marketing effort behind its World Elite program, a rewards program offered to affluent consumers. The company also this summer launched its Priceless Cities program, which will allow MasterCard customers to gain access to special events using their cards.

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