MA 2009 Q1 Earnings

Before the opening bell on May 1, MasterCard Inc. (MA), the global credit card and payment processor confirmed that the company’s 1st quarter profits slipped over last year’s performance as consumers are shying away from using their credit cards during the economic recession. Although results were down from a year ago, the company still managed to come in above market expectations.

For the recent quarter, MasterCard booked net income of $367.3M, or $2.80 per share, compared to the previous year’s 1st quarter profits of $446.9M, or $3.37 per share, a decrease in earnings of nearly 18%. During last year’s quarter, MasterCard benefited from a $173M gain from the sale of their investment in Redecard SA, a Brazilian credit and debit card provider.

As for the company’s revenues, MasterCard saw company sales decline slightly from last year’s results, posting total sales of $1.16B, down nearly 2% from $1.18B a year ago. Even with overall revenues slipping during the quarter, MasterCard witnessed an increase in the total number of processed transactions throughout the period, up 6% to 5.1 million. The company’s results were also affected by an unfavorable exchange rate, which cut into the bottom-line by nearly 10% in processing fees.

On average, analysts within the industry were looking for MasterCard to record net earnings for the 1st quarter of $2.61 per share on overall sales of $1.21B.

Deeper inside the numbers, MasterCard benefited from the company’s decrease in total operating expenses, which receded by more than 11% to total $595M. Much of the savings were due to initiatives to decrease total travel expenses, personnel costs and lowering professional fees. With that, the company’s operating margin improved by 5% to a 48.6% rate. Additionally, MasterCard cut advertising and marketing expenditures by more than 35% to help lower their cost basis.

In a statement following the company’s earnings release, Robert Selander, MasterCard president and CEO stated, "As we navigate through these challenging economic times, we've taken important steps to better align our operations with the current environment. We've taken considerable cost-reduction actions allowing us to deliver a strong operating margin of 48.6%, while keeping focused to ensure MasterCard is well positioned for long-term growth."

In another portion of the company’s financial data, MasterCard affirmed that their Gross Dollar Volume (GDV) increased 0.3% to $550B. GDV is the overall measure of dollars used primarily in foreign exchange. Throughout the globe, purchase volume using MasterCard products also increased 0.3% to total $411B. By the end of March, MasterCard had more than 967 million cardholders, up 4% over last year’s tally in March 2008.

Selander went on to add, "Our volumes have been impacted by significant head winds, such as slower cross-border travel, lower gas prices, and an appreciating dollar. We don't believe there's any reason to assume the economic slowdown across the world will improve for the balance of this year."

After posting a seven-month high of nearly $189 to end April, the first trading day in May saw MasterCard’s stock drop nearly 6%, losing $10.55 to trade at $172.90 per share. Over the course of a year, shares of MA have traded within a range between $113.05 and $320.30 per share.

By BetterTrades