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MasterCard Rides Surge in Card Payments

By    |   Thursday, 08 March 2012 09:09 AM

Credit card giant MasterCard (MA) is riding a surge in card payments in place of cash or checks. Electronic payments are forecast to rise in 2012, too, analysts add.

MasterCard offers global payment processing and brand licensing to about 22,000 financial institutions. Brand names include Cirrus, Maestro and MasterCard.

Revenues and earnings handily beat analysts’ estimates. MasterCard’s fourth quarter 2011 sales were $1.7 billion, up 20.2 percent from 2010. Quarterly net income soared to $4.03 per share, up 27.5 percent.

For full-year 2011, MasterCard logged sales of $6.7 billion, up 21.2 percent from 2010. Net income for 2011 was $18.70 per share, up from $14.05 in 2010. Processed transactions rose 23.2 percent in 2011.

MasterCard is laying the foundation for growth by forging more strategic partnerships in developed and emerging countries, MasterCard CEO Ajay Banga says. For 2012, Wall Street’s consensus earnings estimate has risen to $21.95 per share. The 2013 estimate is $25.75.

Investor rewards

Analysts see multiple growth opportunities for MasterCard, including international expansion, debit cards, mobile payments and prepaid cards. The company had a strong balance sheet, no long-term debt and $3.7 billion in cash at year-end 2011.

The upshot: MasterCard can reward investors with higher dividend payouts and stock repurchases. Already this year the dividend was doubled to 30 cents per share.

Not surprisingly, analysts are bullish on MasterCard. Of the 35 analysts followed by Thomson/First Call, 14 have strong buy recommendations and 12 have buys, with nine holds.

S&P analysts have a hold rating on MasterCard, though, citing evolving competition and domestic regulation.

The company next reports on May 3.

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