MasterCard ( MA) shares jumped more than 12% after the company beat analyst profit estimates, as more customers use credit cards for daily purchases. In the final three months of the year, the Purchase, N.Y.-based company reported net income of $304 million, or $2.26 a share, compared to $41 million, or 30 cents a share, in the year-earlier quarter. The most recent 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. Revenue rose 28% to $1.07 billion. Analysts estimated the company would make 72 cents a share on $985 million of revenue.
For the full year MasterCard's net income totaled $1.09 billion, or $8 a share. The results include after-tax gains of $254 million, or $1.87 a share, from selling a significant portion of the company's investment in Redecard. Yet excluding the impact of several other items, including litigation reserves and a settlement related to the World Cup soccer events, profit was $1.03 billion, or $7.58 a share. Special items for the full year in 2006 include litigation settlements and interest income earned on proceeds from MasterCard's May 2006 IPO, among other things. MasterCard's gross dollar volume during the fourth quarter rose 15% to $634 billion, on a local currency basis. The number of transactions processed rose 17% to 5.2 billion, the company said. Purchase volume worldwide rose 16% to $477 billion, on a local currency basis, fueled by increased spending outside the U.S. "Although we have not seen the same impact on our businesses that the slowdown in the U.S. economy has had on other financial services companies, continued weakness has the potential to slow the rate of our U.S. growth in the future," said MasterCard's CEO Robert Selander, during a conference call to discuss earnings. This year, Selander expects slower net revenue growth, "but still at double digit rates," and slowing expense growth as the company looks to moderate hiring compared to 2007. Still, Selander said the company is relatively shielded from economic uncertainty because a significant portion of the business is transaction driven, much of the business is generated outside the U.S. and the general shift from paper to electronic forms of payment continues to be strong. More importantly, the company does not keep consumer debt on its balance sheet. Interestingly, as a result of the slowing economy, Selander said that "a mix shift in consumer spending is occurring," which is driving higher growth rates. "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 growth rates in U.S. volumes when compared to the third quarter of 2007." Shares rose $24.07 to $213.07.
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