Investors Cheer as MasterCard (MA) Posts 43% Surge in Q3 Earnings

November 2, 2011 9:15 AM EDT Send to a Friend
Shares of MasterCard (NYSE: MA) are up more than 8 percent Wednesday following the release of the company's financial results for the third quarter of 2011.

The company reported net income of $717 million, up 38.4 percent year-over-year, and earnings per diluted share of $5.63, up 42.9 percent from the year-ago period. The Street was forecasting earnings per share of $4.82.

“We are pleased with our strong results this quarter, which were driven by several factors including double-digit increases in volumes and processed transactions in most regions across the globe,” said Ajay Banga, MasterCard president and CEO.

Net revenue for the quarter increased 27.3 percent to $1.8 billion versus the same period in 2010. The Street was estimating total revenue of $1.71 billion. On a constant currency basis, net revenue increased 23.8 percent. Management noted net revenue growth was primarily driven by the impact of the following: an 18.1 percent increase to $844 billion in gross dollar volume on a local currency basis, an 19.3 percent increase in cross-border volumes, and a 20.5 percent increase in processed transactions.

Total operating expenses increased 23.1 percent to $816 million. Excluding currency fluctuations, operating expenses were up 20.8 percent. The increase reflects a 25.2 percent increase in general and administrative expenses, a 6.8 percent increase in advertising and marketing, and a 37.6 percent increase in depreciation and amortization.

Operating margin was 55.1 percent, up from 53.6 percent in the third quarter of 2010.

Worldwide purchase volume during the quarter was up 17.2 percent on a local currency basis to $628 billion. As of September 30, 2011, the company’s customers had issued 1.7 billion MasterCard and Maestro-branded cards.

Banga continued, “Economic indicators across the world remain mixed, with the uncertainties in Europe and the United States weighing on sentiment and dominating headlines. Nonetheless, we continue to focus on displacing cash and winning share across markets. We will be adding to our domestic processing in Italy as we have signed a multi-year agreement with a major bank to convert their debit cards to Maestro-only from a co-brand with a domestic scheme. In the U.S., Huntington Bank recently announced a conversion to MasterCard debit cards and will be implementing our IPS platform. We also continue to work with governments around the world, most recently in India and Mexico, to replace some of their paper-based, manual procurement systems with MasterCard commercial products.”


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