Credit Card Stocks: Staples, Not Luxuries

Robert Dodd, analyst at Morgan Keegan, offered CNBC his take on the world’s largest credit card companies, MasterCard and Visa.

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MasterCard and Visa shares fell on Thursday, even after they each reported earnings -- Visa on Wednesday, MasterCard today -- that beat Wall Street expectations.

“The companies are doing very well in a soft economy,” said Dodd. “Volumes were in line, pricing was up, and they've got excellent control of expenses. But expectations have been very high for both MasterCard and Visa. So they’ve done very well, but not done well enough.”

Consumers are "using more on credit cards in terms of non-discretionary spendings," said Dodd. Visa saw discretionary spending make 44 percent of credit card spending in the last quarter -- up 200 basis points over the last year.

He also noted that as inflation drives pricing upwards, people are spending more via credit cards on staple products than they are for discretionary items.


Morgan Keegan has managed/co-managed a public offering of equity securities for Visa; and has received and expects to receive compensation for investment banking services from Visa.