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MasterCard Breaks Out $1B Buyback

NEW YORK ( TheStreet) - MasterCard (MA - Get Report) opted to go on the offensive ahead of its annual shareholder meeting later this month, announcing its board has approved the repurchase of up to $1 billion worth of its Class A common stock.

"This stock repurchase program is the result of a periodic review of our capital structure, and is enabled by MasterCard's strong and consistent cash flow," said Ajay Banga, the company's CEO and president in a statement. "It is an important way of returning cash to our shareholders while allowing us the flexibility to pursue our business strategy."

The program is effective immediately, said MasterCard, whose stock rose 3.5% to close Tuesday's session at $199.75. The shares continued to gain ground in extended trading, rising to $202.55, according to Yahoo Finance.

2010 has been a rough year for MasterCard shareholders as the stock is down 25% year-to-date with its 52-week high of just under $270 in late January a distant memory. Against that backdrop, the Sept. 21 annual meeting had the potential to be contentious.

The stock's decline mirrors that of shares of its counterpart Visa (V - Get Report). Both companies are very sensitive to consumer confidence, which remains shaky with unemployment still just below 10%. Investors have also been worried about the impact that financial reform -- specifically the Durbin amendment related to interchange fees on debit card transactions -- will have on profits at the companies.

Wall Street remains very bullish on MasterCard, however, with 28 of the 33 analysts covering the company at strong buy or buy. The median 12-month price target is $275, implying upside of more than 35% from current levels.

Visa CFO Byron Pollitt said Tuesday that the company believes the Durbin amendment "mainly targets" debit transactions where a customer uses a personal-identification-number, or PIN, rather than a signature, according to a report from The Associated Press.

Pollitt also estimated that PIN debit transactions in the U.S. account for roughly 16% of Visa's overall revenue, the AP said.

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