Merry Times for MasterCard

The shares surged Wednesday after the credit-card outfit reported a sharp rise in quarterly profit

MasterCard (MA) said May 2 that its profits surged to a record high, as increasing numbers of people use credit cards around the world. The shares surged on the news on May 2, adding to the stock's already impressive winning streak.

The Purchase (N.Y.) company's net income amounted to $214.9 million during the quarter ended March 31, compared to $126.7 million during the same period last year. "We are very pleased with our first-quarter financial results, which reflect the highest quarterly net income in MasterCard's history," said CEO Robert W. Selander in a press release May 2.

MasterCard has been raking it in as increasing numbers of people switch to plastic money, which is easier for making electronic payments on the Internet. As of March 31, 2007, the company's bank customers had issued 835 million MasterCard cards, an increase of 11.3% year over year. This led to the processing of 4.2 billion transactions in the March quarter, up 19% from the same period of 2006.

Thanks to such improvements MasterCard's net revenues for the quarter were $915 million, a 23.9% increase versus the same period in 2006. Changes in the euro's value relative to the dollar also contributed to around 2.5% of the increase. Another 5% of revenue growth was related to pricing changes in recent months, such as MasterCard's restructuring of cross-border transactions implemented in April 2006.

MasterCard ended up earning $1.57 per share during the March quarter, compared to the consensus estimate $1.16 per share.

After the news the company's stock gained 10% to close at $126.35 per share on May 2, having touched a 52-week high of $130.15 earlier in the session. The stock price has tripled from its 52-week low of $40.20 per share on May 25.

Analysts have had high hopes for MasterCard. "We expect strong long-term growth in transactions and volume as the card industry continues to steal global market share from cash and checks," Morningstar analyst Ryan Batchelor said in a note Feb. 9. He called MasterCard's long-term story "extremely attractive."

Meanwhile, Keybanc analyst Anurag Rana maintained the firm's buy recommendation on the shares, according to a report from Standard & Poor's MarketScope. Rana is revising the firm's earnings estimates and price target on the credit-card outfit.

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