Is there anything MasterCard (NYS: MA) can't do? The stock market yesterday teetered on the verge of its longest losing streak in 33 years, yet MasterCard dazzled investors with another stellar quarterly report, rocketing its shares to a new all-time high.
For the quarter, MasterCard's profits grew by 36% to $4.76 per share, on a revenue spike of 22% --easily trouncing the Wall Street consensus estimate of $4.22. You'd think analysts would learn by now that MasterCard has a history of beating estimates, but apparently not. From top to bottom, this report was littered with bullish figures which I feel are worth examining below.
First, MasterCard cannonballed into Visa's (NYS: V) swimming pool by persuading SunTrust Banks (NYS: STI) and Banco Santander's (NYS: STD) U.S. affiliate Sovereign Bank to issue MasterCard debit cards. Both large banks had previously offered Visa debit cards, and this switch provided a substantial boost to revenue in the second quarter, according to the company.
The rising trend of international debit usage also looks solidly intact. During the quarter, the company's cross-border transactions grew by 19.3%, while worldwide purchasing volume rose 16.3%. MasterCard largely attributed this growth to a long-term trend of consumers less frequently using cash.
Perhaps the oddest statistic in MasterCard's report is that regardless of the economic conditions, it can make a lot of money. It's pretty obvious that if the economy is booming, MasterCard will turn a sizable profit. But because of the deflationary effect our weak economy is having on the prices consumers pay for goods, the amount of transactions has jumped dramatically. Consumer prices dropped 0.2% in June, marking the largest one-month drop in more than a year. That helped get consumers to open their wallets.
Much like the network participation fee that Visa outlined last week when it reported its quarterly results, MasterCard also debuted its own new fee plan. While not going into rigorous detail, MasterCard laid out a two-tiered approach in which its merchants will be charged a fee based on the size of their business. The passage of the Dodd-Frank financial reform bill last year capped the amounts that companies like Visa and MasterCard could charge their merchants per transaction. These new fee structures should aid both companies in recouping any potential lost revenue.
Finally, the company continued to do right by shareholders, authorizing an extension of its share repurchase program from $1 billion to $2 billion during the quarter. Having repurchased 1.5 million shares during the quarter, MasterCard still has $935 million available to buy back even more stock.
Based on their latest quarterly results, American Express (NYS: AXP) , Discover Financial Services (NYS: DFS) , Visa, and now MasterCard have toppled analyst projections by 8%, 45%, 2% and 13%, respectively. With consumer prices falling, global transaction volume rising, and these companies quickly adapting to new legislation through fee modifications, I'm finding it very difficult to find a chink in this sector's armor. Mark my words: MasterCard is the Apple of the credit card processing sector. It can't be stopped!
With MasterCard up 13% yesterday, and sitting at fresh highs, would you consider investing in it here? Share your thoughts in the comments section below, and consider adding this credit behemoth to your watchlist.
At the time thisarticle was published Fool contributorSean Williamshas no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLongThe Motley Fool owns shares of Apple.Motley Fool newsletter services have recommended buying shares of Visa, Discover Financial Services, and Apple, as well as creating a bull call spread in Apple. Try any of our Foolish newsletter servicesfree for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has adisclosure policythat's into charging your portfolio higher, not your credit cards.
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