MasterCard Inc. (MA), the second-biggest U.S. payments network, posted fourth-quarter profit that beat analysts’ estimates as customers made more purchases.
Net income excluding litigation charges increased 18 percent to $605 million, or $4.86 a share, from $514 million, or $4.03, a year earlier, the Purchase, New York-based company said today in a statement. The average estimate of 33 analysts surveyed by Bloomberg was $4.80 a share.
“It was a solid quarter capping a really solid year despite the economic challenges,” MasterCard Chief Financial Officer Martina Hund-Mejean said in a phone interview after results were announced.
Chief Executive Officer Ajay Banga is fending off competitors Visa Inc. (V) and Shanghai-based China UnionPay as he seeks a larger share of the electronic payments processing market. Banga is targeting developing countries such as Myanmar, Ghana, Nigeria and Angola for growth amid a global consumer shift from cash to plastic.
“We are gaining traction in our U.S. credit business with some recent wins, continuing to experience momentum in our mobile initiatives around the world, and securing important business in emerging markets like Africa and Brazil,” Banga, 53, said in the statement.
Profit comparisons were skewed by a $770 million expense tied to settling litigation with merchants taken in the fourth quarter of 2011. Including that cost, earnings a year earlier were $19 million, or 15 cents a share.
MasterCard gained 0.4 percent to $518.11 at 10:32 a.m. in New York. The firm climbed 8.8 percent in the fourth quarter, outpacing the 70-company Standard & Poor’s 500 Information Technology Index (S5INFT), which fell 6.2 percent. The shares jumped 32 percent in 2012, more than doubling the index’s 13 percent return.
Consumer spending in the U.S., which accounts for about 70 percent of the economy, expanded at a 2.2 percent annual rate in the final three months of 2012. The pace followed a 1.6 percent advance in the third quarter and was the fastest since January through March, according to Commerce Department figures released yesterday.
MasterCard’s total revenue increased 9.7 percent to $1.9 billion, just beating the Bloomberg forecast of $1.89 billion. Worldwide spending on MasterCard- and Maestro-branded cards climbed 13 percent to $727 billion, based on local currencies, the company said. Processed transactions jumped 20 percent to 9.2 billion.
Total operating expenses increased 3 percent to $996 million from a year earlier, excluding the litigation provision, the company said. Tien-Tsin Huang, an analyst with JPMorgan Chase & Co. (JPM) in New York, had estimated a 4 percent increase.
Rebates and incentives, which encourage banks to use the firm’s products, climbed 21 percent to $782 million, according to a presentation on the company’s website. Huang, who has an overweight rating on the shares, had predicted $803 million.
“Revenues were better than we expected on lower rebates and slightly better than expected volume, while margins came in higher on slower expense growth,” Huang wrote in a note to clients.
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