Mastercard Incorporated (NYSE: MA): Third Quarter Earnings Preview 2009

By: iStockAnalyst Friday, October 30, 2009 11:30 AM

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Mastercard Incorporated (MA) is scheduled to report its fiscal third quarter 2009 financial results on Tuesday, November 3, 2009. In the last five quarters, the company's actual earnings exceeded the market's consensus significantly.

Mastercard Incorporated previously reported it earned $1.28 billion, or $2.67 per share, in the second quarter, up 2.7% from $1.25 billion, or $2.11 per share, a year earlier. In the last three years, the company's Q3 revenues trended up over Q2 revenues. The trend is likely to continue.

Analysts' estimates for the quarter ending September 2009 (Q3) range from a low of $2.77 to a high of $3.12, with a consensus of $2.92. For the fiscal quarter ending September 2009, the consensus EPS forecast has remained the same over the past week at $2.92 and increased the same over the past month from $2.9. Upward revision over the past month is attributable to increasing revenues and declining operating expenses. Moreover, headwinds such as appreciating US dollar, lower gas prices and slower cross-border travel that impacted the company's second quarter earnings have eased considerable since then. The company is also benefiting from the secular shift, cash and check to electronic payments. Its business model and global diversification continue to provide a good degree of resilience in this environment.

On the legislation front, the Government Accountability Office, the investigative arm of Congress, is expected to release a report on interchange fees next month. The Government Accountability Office, the investigative arm of Congress, is expected to release a report on interchange fees next month, says that it will be very difficult for merchants to push this legislation through given the other priorities that Congress is focused on right now, which means there may not be a downward revision in the interchange fee set by credit card companies such as Mastercard and Visa.

For the fiscal year ending December 2009, the consensus EPS forecast has remained the same over the past week at $11 and increased the same over the past month from $10.95. This year the company is expected to fall below its minimum average, annual net revenue growth objective of 12% on a constant currency basis. On the positive side, advertising and marketing spending for the full-year 2009 is expected to be lower than full-year 2008 on both and as-reported and constant currency basis.

The company's stock closed Thursday at $227.92, compared to the 52 week range of $113.05 and $232.25. The stock seems to be trading at appropriate levels.

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10/31/2009 6:28:23 AM The Need for Comprehensive Credit Card Reform Legislation by Brian J. Donovan The average interchange fee in the U.S. is seven times the interchange fee set by Visa and MasterCard in countries throughout the rest of the world. Using 2008 figures, if the interchange fee charged by credit card issuers was decreased (via comprehensive credit card reform legislation) from the current 2.10% to 0.60%, the result would be an annual savings of approximately $34.3 billion for U.S. merchants and consumers. Credit card issuers could retain 0.3% as a processing fee, the remaining 0.3% could be a "tax" used to fund a Natural Disaster Trust Fund (NDTF). In 2008, this would have generated $6.86 billion in funding for a NDTF. Let's be clear. The interchange fee is a hidden tax, just not a tax subject to political control or for which there is any discernible social benefit. Decreasing, and imposing a transparent tax on, the interchange fee would have the same stimulus effect of a tax break, but without an impact on the federal budget. The following article discusses how comprehensive, standardized, simplified, and transparent credit card reform legislation may fund a Natural Disaster Trust Fund. http://www.csnews.com/csnews/images/pdf/creditcardreform.pdf Reply Rating: (1) (0)

The average interchange fee in the U.S. is seven times the interchange fee set by Visa and MasterCard in countries throughout the rest of the world. Using 2008 figures, if the interchange fee charged by credit card issuers was decreased (via comprehensive credit card reform legislation) from the current 2.10% to 0.60%, the result would be an annual savings of approximately $34.3 billion for U.S. merchants and consumers. Credit card issuers could retain 0.3% as a processing fee, the remaining 0.3% could be a "tax" used to fund a Natural Disaster Trust Fund (NDTF). In 2008, this would have generated $6.86 billion in funding for a NDTF.

Let's be clear. The interchange fee is a hidden tax, just not a tax subject to political control or for which there is any discernible social benefit. Decreasing, and imposing a transparent tax on, the interchange fee would have the same stimulus effect of a tax break, but without an impact on the federal budget.

The following article discusses how comprehensive, standardized, simplified, and transparent credit card reform legislation may fund a Natural Disaster Trust Fund.

http://www.csnews.com/csnews/images/pdf/creditcardreform.pdf

Rating: (1) (0)

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The above story is the opinion of the author only and it does not reflect iStockAnalyst opinion. Further, the author is not personally advising you regarding the suitability of the story for your investment needs. In no event iStockAnalyst will be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from or arising out of, or in connection with the use of this information. Please consult your investment advisor before making any investment decision.

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