Visa IPO Seeks MasterCard Riches

But while some of those financial institutions have reported problems related to consumer credit, MasterCard has fared much better.

MasterCard surged 15% on Thursday after posting a quarterly profit that was seven times higher than the year-earlier period, beating analysts' estimates. The stock, which priced at $39 a share during its own IPO in May 2006, is trading above $200. Shares rose an additional 4.1% on Friday.

In the final three months of the year, the Purchase, N.Y.-based MasterCard reported net income of $304 million, or $2.26 a share, compared with $41 million, or 30 cents a share, in the year-earlier quarter. While last quarter's results included an after-tax gain of $185 million, or $1.37 a share, from additional sales of MasterCard's investment in Brazilian credit card processor, Redecard S.A, revenue rose 28% to $1.07 billion.

Fueling revenue growth was MasterCard's surge in gross dollar volume to $634 billion, up 15%, while the number of transactions processed rose 17% to 5.2 billion, it said.

MasterCard's "magnitude of EPS upside was a positive surprise to the market, as was the realization that with these numbers, there really are no signs that a slowing U.S. consumer is impacting the model negatively at this time," writes Christopher Mammone, an analyst at Deutsche Bank. "We think the shares could continue to outperform as Street numbers are likely to go materially higher after this print, and so we are raising our price target to $250."

CEO Robert Selander acknowledged during a conference call that while revenue growth will likely slow this year, "a mix shift in consumer spending" is actually helping the business.

"Over the past several months, consumers have moved away from discretionary items such as jewelry, full-service restaurants and home furnishings toward everyday purchases including gasoline, grocery and personal health care items," Selander said. "This movement to everyday purchases aligns well with where MasterCard is broadly positioned in consumers' wallets. For us, the shift in spending patterns has translated into higher fourth quarter."

Which is good news for Visa, too. Gillen says the trend to smaller and more diverse transactions will "only continue," and any downturn in the economy would likely be "a temporary hit."

"Long term, the prospects are very good for both organizations," he says.

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