MasterCard Shares Hit New High on Strong Profit Report

MasterCard, the world's No. 2 credit card processor, said Wednesday that increased cardholder spending, particularly overseas, boosted its profit by 63 percent in the third quarter.

Its shares soared nearly 15 percent, briefly touching a new all-time high of $179.00, in Wednesday trading on the New York Stock Exchange. MasterCard had priced its initial public offering in May 2006 at $39 per share.

The Purchase, N.Y.-based company said profit in the July to September period was $314 million, or $2.31 per share, up from $193 million, or $1.42 per share, a year ago.

The latest results include after-tax gains from the partial sale of its investment in Redecard, a company that signs up merchants in Brazil.

Excluding that gain, profit came to $1.80 per share. Revenue rose 20 percent to a record $1.08 billion from $902 million a year ago.

The results beat estimates. Analysts polled by Thomson Financial predicted earnings of $1.42 per share on revenue of $1.03 billion.

"We continue to benefit from positive secular trends and outstanding growth in international and emerging markets," said Robert W. Selander, MasterCard's president and chief executive, in a statement.

Cowen analysts maintained their "outperform" rating on MasterCard, pointing to reductions in overhead, strong cross-border transaction volume, and solid growth in emerging markets.

Also pleasing investors, MasterCard said its board approved an incremental $750 million stock repurchase, in addition to the $500 million buyback approved earlier this year.

Companies in the financial sector, particularly banks and brokerages, have posted dismal third-quarter results this year due to defaulting home loans and tightening credit markets.

The card business, however, has not seen much credit deterioration -- and furthermore, MasterCard is a payment processor, meaning it makes its money through branding and fees. The debt risk is held by the 25,000 banks in more than 200 countries that issue its cards.

MasterCard's results did reflect slow growth in the United States, but that softness was offset by significant gains in Latin America, South Asia, the Middle East, Africa and Europe.

U.S. credit and charge programs saw a decline in cash volume, but that was offset by a rise in purchase volume. U.S. debit programs also grew. Meanwhile, these programs abroad saw even sharper, double-digit percentage growth.

Total gross dollar volume gained 12.8 percent to $577 billion, and the number of total transactions processed rose13.3 percent to 4.8 billion.

Cross-border transactions rose 20.6 percent in the most recent quarter. Worldwide purchase volume rose 14.1 percent to $430 billion. Total operating expenses rose 16.3 percent to $730 million.

The weakening dollar contributed to 2.3 percent of MasterCard's quarterly revenue growth and 1.6 percent of operating expenses, the company said. The dollar has been tumbling to new lows this year against the euro.

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