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.

Full Disclosure: None.

Garmin Ltd. (NASDAQ: GRMN): Q3 Earnings Preview 2011

Garmin Ltd. (NASDAQ: GRMN) 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 50 cents per share on revenue of $618.09 million. In the year ago quarter, the company reported earnings of 70 cents per share on revenue of $692.36 million.

Garmin Ltd. and its subsidiaries design, develop, manufacture, and market global positioning system (GPS)-enabled products and other navigation, communication, and information products worldwide. It operates in four segments: Automotive/Mobile, Outdoor/Fitness, Marine, and Aviation. Garmin has about 55 percent to 60 percent of the U.S. market for navigation devices. TomTom NV is its main U.S. competitor. The company, being the largest GPS manufacturer in the world, benefits from economies of scale. This lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods.

In the preceding second-quarter, the Camana Bay, Cayman Islands-based company's net income was $109.48 million, or 56 cents per share, compared to $134.82 million or $0.67 per share, in the year-ago quarter. On a pro forma basis, the company earned 63 cents per share in the second quarter. Revenue slipped 8 percent to $674.10 million from $728.77 million in the same quarter last year. Analysts, on average, expected the company to report earnings of 66 cents per share on revenue of $633.75 million.

At its last earnings call in February, Garmin lowered its fiscal 2011 earnings outlook to a range of $2.00 to $2.15 per share from the prior range of $2.25 to $2.50 per share. The company said the revised outlook is due primarily to the acceleration of net deferred revenues associated with its bundled product offerings. However, Garmin raised its full-year forecasts to $2.5 billion to $2.6 billion, from the prior range of $2.4 billion to $2.5 billion. The revised outlook primarily reflects the acquisitions of Navigon AG and Tri-Tronics Inc.

Personal navigation device makers like Garmin have been facing increased pressure from GPS-equipped smartphones. Cannibalization was always expected and Garmin too expected it. It therefore launched its own version of a smartphone, called Garminfone and nuviphone.However, the company abandoned the smartphone business after failing to find its way in the highly competitive sector. Instead, Garmin decided to go along in the footsteps of archrival TomTom. In line with this strategy, the company is now making apps for the smartphone market.

PNDs are also reaching a saturation point in the developed markets of North America and Europe. Garmin has now decided to pursue growth in the emerging markets of Asia and South America, where the chances of success with a premium-priced product will be limited.Garmin expects the North American personal navigation device market to decline 25 percent this year and the European market to shrink by a high single digit to 10 percent.

To offset the slumping demand, Garmin has been trying to reduce its reliance on personal navigation devices while turning itself from a one-product firm to a content and services franchise by offering live traffic and mapping services. In  August, the company said that its efforts to revive waning sales of its once popular personal navigation devices will only bear fruit in the second half of next year

Among other developments, Garmin recently acquired the distributor of its automotive, recreation, fitness and marine products in southern Africa as well as Garmap Ltd., a South African mapping and mobile applications provider. Garmin said that the deal will strengthen its presence in a rapidly growing region.

Full Disclosure: None.