MasterCard Charges Ahead

Investors snapped up the stock Wednesday after the credit-card outfit reported a surge in third-quarter profit

MasterCard (MA) on Nov. 1 reported a surge in profits during the third quarter, as customers moved away from paper money to spend instead with plastic.

Announcing results from its first full quarter since its May, 2006, initial public offering, the Purchase (N.Y.)-based credit card company said it had net income of $193 million, or $1.42 per share during the three months ended Sept. 30. This compares to $106.1 million, or 79 cents per share during the same period of 2005.

The mean analyst estimate on the stock had been for $1.07 per share, according to the San Francisco research firm StarMine.

MasterCard benefited from a rise in spending on a growing number of its card products. As of Sept. 30, the company's customers had issued 818 million MasterCard cards, an increase of 12.6% percent over the same period in 2005.

"These strong results underscore our success in displacing paper-based forms of payment in all corners of the globe in the face of a highly competitive payments market," said MasterCard CEO Robert W. Selander in a press release.

During the 2005 third quarter 2005, MasterCard had expenses related to litigation settlements and also changed the way it accounted for cash-based executive incentive plans. Revenue grew to $902 million during the recent third quarter from $792 million during the same period of 2005. The mean analyst revenue estimate had been for $871 million, according to StarMine.

Investors bid up the stock 15.6% to $85.87 per share in trading on the New York Stock Exchange Nov. 1, after touching an all-time high of $87.50 earlier in the session. The stock price has rocketed since from $40.20 per share on May 25 soon after its initial public offering.

"The third-quarter results continue to demonstrate the strength of our business model and the momentum within the overall payments industry," said Chris A. McWilton, MasterCard's CFO, in a press release.

MasterCard's rival Visa said Oct. 11 that it plans to reorganize into a new public corporation called Visa Inc., which will combine the business units Visa Canada, Visa USA, and Visa International. After completing a series of mergers, Visa plans to begin its own initial public offering. After viewing MasterCard's success as a public company, Visa is no doubt eager to get in on the fun.

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