Tuesday, April 29, 2008

Mastercard (MA) Continues to Impress

Mastercard (MA) just continues it's impressive march, yet another fantastic quarter, layered on top of the past few [Jan 31: Mastercard Continues to be Priceless] & [Oct 31: Bravo Mastercard]

As I outlined in October [Oct 16: Rebuilding Mastercard] maybe people have a few misconceptions about the company.

Mastercard (MA) got whacked in the summer credit swoon and seems to be thrown into the 'financials' bucket - granted its a financial company but it is basically a transaction company, simple as that. Further, half of its revenue is overseas and I expect that to continue to grow as we get the middle class of Brazil, China, India, et al up and running.

There are also worries in this name that the stretched consumer is going to slow down but I'd argue that "could" be a positive or at worst neutral as a stretched consumer uses what when he/she doesn't have cash? Credit! I've already been reading how the worst off in the US are paying off their credit cards ahead of their mortgages (and Mastercard does not even have that risk which is another misconception - the banks offering their branded cards are the ones who carry the risk)

So you have a global brand, which will benefit from weakening dollar, with growth avenues in 3/4 of the world - and its getting throw out with the Citibank's of the world. Typical lemming behavior.

On to earnings...
  • MasterCard's profit more than doubled in the first quarter, the card processor said Tuesday, as more customers outside the United States used their credit and debit cards for purchases.
  • Cardholder spending within the United States rose, too, but at a more moderate pace, indicating that while Americans are increasingly turning to plastic in a weak economy, emerging markets are becoming especially lucrative for the industry.
  • The Purchase, N.Y.-based card company said Tuesday it earned $446.9 million, or $3.38 per share for the January to March period. That is up from $214.9 million, or $1.57 a share, in the same timeframe last year.
  • Even after excluding the effects of a gain from terminating a customer business agreement and another gain from selling its remaining holdings in the Brazilian company Redecard, MasterCard's earnings per share totaled $2.59. That was above the average analyst estimate of $2 a share, according to Thomson Financial.
  • CEO and President Robert Selander said during a conference call with analysts that he continues to see U.S. consumers shift away from luxury purchases, such as home furnishings, toward necessities like food and gasoline, which are rising in cost.
  • Meanwhile, card use outside the United States surged even faster, with gross dollar volume soaring 30 percent to $352 billion. Regions such as Latin America, South Asia, the Middle East and Africa saw particularly significant growth.
  • Revenue totaled $1.2 billion, up 29 percent from the previous year and above the average analyst estimate of $1.07 billion, according to Thomson Financial.
  • The effect of the dollar's tumble against other world currencies -- particularly the euro and the Brazilian real -- boosted MasterCard's revenue by more than 5 percent.
Long Mastercard in fund; no personal position

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