MasterCardposted results that beat analyst expectations by a much narrower margin than in the past, sending its shares down as much as 12.5 percent in a skittish market Wednesday.
The credit and debit card processor said earnings excluding items nearly doubled as it processed 15.2 percent more transactions and global purchase volume rose nearly 15 percent on a local currency basis. Revenue rose almost 18 percent to $997 million.
But the earnings excluding items beat expectations by just 6.7 percent, compared with a 35 percent beat last quarter, disappointing investors,who had sent the shares up some 60 percent this year through Wednesday.
"They didn't blow out numbers this time. It's been a tremendous run, but it's hard to sustain that momentum," said Chris Brendler, analyst at Stifel, Nicolaus & Co. in Baltimore, who rates MasterCard a "hold."
The declines came as credit worries flared at Beazer Homes USA on Wednesday and American Home Mortgage Investment on Tuesday, making investors skittish about companies in the finance sector.
MasterCard's Chief Financial Officer Chris McWilton said on a conference call that the company is not seeing any signs of spending on its cards slowing down. In a downturn, credit card usage may increase, he said.
MasterCard shares went public at $39 a share on May 24, 2006, and have more than quadrupled since then. They now trade at nearly 30 times expected 2007 earnings, which is high compared to the Standard & Poor's 500, but not necessarily unreasonable for a transaction processor that seems to be turning in strong growth.
MasterCard said earnings excluding items rose to $195 million, or $1.43 a share, from $101 million, or 74 cents a share, a year earlier.
Analysts had on average expected earnings of $1.34 a share, according to Reuters Estimates.
Net income was $252.3 million, or $1.85 a share, compared with a loss of $310.5 million, or $2.30 a share a year earlier.
Net income for the second quarter of 2007 included a $3.4 million litigation reserve and $90 million of other income linked to a settlement regarding sponsorship of the next two World Cup soccer tournaments.
The second quarter of 2006 included a $395 million non-cash expense linked to the company's donation of shares to the MasterCard Foundation.
MasterCard shares were down 9.3 percent at $145.90 on Wednesday morning on the New York Stock Exchange, after falling as low as $140.67 earlier in the session.