NEW YORK -- MasterCard Inc., the world's No. 2 credit card franchise, on Wednesday said it swung to a profit in the second quarter from a loss last year, thanks to higher card usage and the dollar's weakness.
The Purchase, N.Y.-based company said profit in the April to June period, excluding items, was $195 million, or $1.43 a share. Including a $90 million settlement that Mastercard accepted in June after Federation Internationale de Football gave World Cup sponsorship rights to rival Visa, second-quarter profit was $252.3 million, or $1.85 per share.
Revenue was a record $997.0 million, up nearly 18 percent from $846.5 million.
In the same quarter last year, the company posted a loss of $310.5 million, or $2.30 per share. During that period, Mastercard had incurred non-cash expenses related to a share donation that occurred simultaneously with its initial public offering, and had put money in reserve for litigation costs. Excluding those charges, the company reported a profit of $101 million, or 74 cents per share.
This quarter's results beat Street expectations. Analysts polled by Thomson Financial had predicted earnings of $1.33 per share on revenue of $974.6 million.
Story Continues Below
The stock fell 4.5 percent in premarket electronic trading Wednesday, however, down from Tuesday's close of $160.80. Mastercard, which hit a 52-week high of $174.60 on July 13, has seen its stock more than quadruple since becoming a publicly traded company in May 2006.
At some point next year, it's likely that all four major credit-card companies will be trading publicly. On July 1, Discover Financial Services began trading after it spun off from Morgan Stanley, and Visa — the world's largest credit card company — is expected to launch an IPO in early 2008.
Robert W. Selander, MasterCard's president and chief executive officer, said in a statement accompanying the press release that the second quarter was the 13th straight quarter of double-digit growth in Mastercard's gross dollar volume, or the amount of money cardholders charged. That figure gained 13.3 percent in the second quarter to $555 billion.
The number of transactions processed rose 15.2 percent to 4.6 billion, and cross-border transactions rose 17.3 percent.
Worldwide purchase volume climbed 14.8 percent to $414 billion.
Two percent of Mastercard's quarterly revenue growth was due to the weakening dollar, the company said. The dollar has been hitting new lows this summer against the 13-nation euro, which has risen about 8 percent against the U.S. currency over the last year.
Total operating expenses rose 3.2 percent to $725 million, due mainly to personnel and legal costs. They were offset, though, by a 12.6 percent decrease in expenses related to the World Cup, which Mastercard no longer sponsors.
The financial sector has taken a beating in recent weeks as worries escalate about a credit crunch in the United States due to souring home loans. Mastercard is a payment processor, however, not a direct holder of credit risk, so it is more shielded against credit deterioration than other companies in its industry. Still, a decrease in consumer spending could hurt Mastercard's revenue going forward.
About 25,000 banks in more than 200 countries issue the company's cards.
© 2007 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.
Editor's note:
Protect yourself from rising inflation. The Fed won`t do it for you!
Why the dollar could crash this year.
Buffett Says This Book Made Him Billions
