MasterCard Beats Analysts’ Expectations With Third Quarter Profits
Major credit card payment network – in fact, the second largest payment network in the world – MasterCard Inc. recently posted profits for the third quarter that beat the expectations of analysts. The profit growth of the company underlines the continuing trend of consumers turning to plastic for their purchases.
The net income of the company was at $452.2 million, higher than last year’s loss of $193.6 million which was partly due to an antitrust lawsuit settlement. The adjusted income of the company, meaning one-time items are excluded, amounts to $456 million or $3.48 a diluted share. Average estimates by several analysts had earlier predicted shares to be at $2.93.
So far, payment network companies have weathered the economic depression and the U.S. unemployment rise well. This is largely due to the continuing shift of consumers from using cash and check payments to debit card and credit card payments. MasterCard and Visa, the number one payment processor, have posted relatively good profits during the past few quarters compared to credit card companies who have been seeing large drops in profits. This is primarily due to the fact that these companies do not directly issue loans to credit card holders. They have therefore been protected from credit card defaults which has done a lot of damage among credit card companies.
In a statement, MasterCard Chief Executive Office Robert Selander said, “Our results once again underscore the global trend toward electronic payments”.
During the quarter, the company saw processed transactions rise by 7.6%, equivalent to 5.8 bullion transactions. The company’s revenue has also grown by 2% during the quarter, amounting to a growth of $1.36 billion. This is larger than the average estimates of analysts made during a survey which was at $1.35 billion.
The growth in plastic payment is expected to continue to rise, the Nilson Report says. The Nilson Report is a highly trusted newsletter from Carpinteria, California and it says that, by 2012, 54% of purchases in the U.S. will be using cards such as credit cards, debit cards and other forms of card payments.
However, credit card companies have currently cut down on available credit and limited a few credit card accounts in an effort to curb the continuing defaults the credit card industry is currently experiencing. This has led to many consumers moving towards debit cards. Unlike credit cards, debit cards pay for transactions by deducting the amount electronically from an existing checking account maintained by the card holder.
