Tuesday, November 4, 2008

Mastercard (MA) Trounces Earnings

We are long Mastercard (MA) but apparently not enough - post earnings the stock is flying 14%. The stock gapped up through its 20 day moving average ($151) and it's next test should be $180 or the 50 day moving average. MA has been "fortunate" enough to be one of the biggest hedge fund liquidations. While U.S. credit spending should suffer some in the recession, and Visa (V) is a bigger beneficiary of debit cards, the move from "cash to plastic" in most of the rest of the world is still in its infancy. That fact is many times lost when this stock sells off. Some cautious forward guidance here but it's not the news, but the reaction to the news that matters - and some of these stocks have been pricing in global catastrophe - so anything short can now be rewarded. Pretty healthy action today but I'm not really going to chase stocks up here.
  • MasterCard Inc (NYSE:MA - News), the world's second-largest card network, posted better-than- expected earnings on Monday, excluding items, boosted by a strong revenue growth outside the Unites States and currency fluctuations. The Purchase, New York-based company reported earnings excluding charges of $322 million, or $2.47 a share. Analysts on average expected earnings of $2.22 per share, according to Reuters Estimates.
  • Revenue increased 24 percent to $1.34 billion, boosted by double-digit growths in Asia-Pacific, Europe and Latin America. In the United States, where MasterCard generates around 40 percent of its transactions, revenue grew only 4.7 percent.
  • In addition, transactions processed increased 13 percent to 5.4 billion, while the gross dollar volume transactions rose 12.3 percent to $662 billion.
  • But Chief Executive Officer Robert Selander said MasterCard expected revenues to grow below the company's long-term target of 12 percent to 15 percent in 2009 amid a fast deterioration of the world's economy. "We are in an economic crisis like I don't think we have seen in our lifetime," Martina Hund-Mejean, chief financial officer, said in an interview with Reuters.
  • Hund-Mejean said MasterCard felt a sharp deterioration of the world's economy in October with a sudden slowdown of cross- border transactions and forecast the economic downturn would be widespread, from the United States and Europe to emerging markets in Asia-Pacific and Mexico.
  • During October, cross-border volume growth was in the high single digits, compared with the 18 percent growth achieved in the third quarter. The marked slowdown is a direct result of Americans cutting back on their travel spending, he said.
  • The slower economic growth together with a recent appreciation of the U.S. dollar -- which lowers revenues from abroad -- is expected to hammer MasterCard business next year. "We are planning on a more prolonged downturn rather than something turning around in the next three to six months ... My main concern is how long this is going to last," Hund-Mejean said.
  • She added the company forecast operating expenses would remain flat in 2009, as MasterCard is reducing spending in contractors, suppliers, trips and cutting frozen jobs.
  • "I think people are going to be happy with their results," said John Williams, a research analyst at Macquarie Capital. "It is somewhat a sigh of relief for people. They thought the world was ending and clearly it is not."
[Jun 9: Mastercard, Visa see Gold in PrePaid]
[Apr 29: Mastercard Continues to Impress]
[Jan 31: Mastercard Continues to be Priceless]
[Dec 7: Mastercard to Benefit from Visa IPO Hype]
[Oct 31: Bravo Mastercard]

Long Mastercard in fund; no personal position

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