MasterCard profit tops estimates as card purchases increase
MasterCard the second-biggest U.S. payments network, posted fourth-quarter profit that beat analysts' estimates as customers made more purchases. The shares climbed in early trading.
Net income excluding litigation charges increased 18 percent to $605 million, or $4.86 a share, from $514 million, or $4.03, a year earlier, the Purchase, New York-based company said today in a statement. The average estimate of 33 analysts surveyed by Bloomberg was $4.80 a share.
Chief executive officer Ajay Banga is fending off competitors Visa and Shanghai-based China UnionPay as he seeks a larger share of the electronic payments processing market. Banga is targeting developing countries such as Myanmar, Ghana, Nigeria and Angola for growth amid a global consumer shift from cash to plastic.
"We are gaining traction in our U.S. credit business with some recent wins, continuing to experience momentum in our mobile initiatives around the world, and securing important business in emerging markets like Africa and Brazil," Banga, 53, said in the statement.
Profit comparisons were skewed by a $770 million expense tied to settling litigation with merchants taken in the fourth quarter of 2011. Including that cost, earnings a year earlier were $19 million or 15 cents a share.
Consumer spending in the U.S., which accounts for about 70 percent of the economy, expanded at a 2.2 percent annual rate in the final three months of 2012. The pace followed a 1.6 percent advance in the third quarter and was the fastest since January through March, according to Commerce Department figures released Wednesday.
Total revenue increased 9.7 percent to $1.9 billion, just beating the Bloomberg forecast of $1.89 billion. Profit comparisons were skewed by a $770 million expense for litigation recorded in the fourth quarter of 2011.
Worldwide spending on MasterCard- and Maestro-branded cards climbed 13 percent to $727 billion, based on local currencies, the company said. Processed transactions jumped 20 percent to 9.2 billion.
MasterCard gained 4.1 percent to $537.25 at 8.30 a.m. in early trading in New York. The firm gained 8.8 percent in the fourth quarter, outpacing the 70-company Standard & Poor's 500 Information Technology Index, which fell 6.2 percent. The shares jumped 32 percent in 2012, more than doubling the index's 13 percent return.
Banga is spending more money as he contends with Foster City, California-based Visa and China UnionPay. The firm's total operating expenses increased 3 percent to $996 million from a year earlier, excluding the litigation provision, the company said.