) fourth-quarter 2012 operating earnings per share of $4.86
modestly beat the Zacks Consensus Estimate of $4.79 and the
year-ago quarter's earnings of $4.03, primarily based on low
Net income for the reported quarter stood at $605 million, up
17.7% from $514 million in the prior-year quarter. Reported net
income, including after-tax provision for litigation settlement
charge of $495 million or $3.88 per share, stood at $19 million
or 15 cents a share in the year-ago quarter. No special items
were recorded in the reported quarter.
The better-than-expected results were largely due to the
outcome of better pricing, increased number of processed
transactions, strong gross dollar value (GDV) growth and marginal
growth in tax rate. Modest growth in operating expenses also
supported the margins' upside.
Total revenue grew 9.7% year over year to $1.9 billion, almost
in line with the Zacks Consensus Estimate of $1.89 billion. On a
constant currency basis, net revenue increased 12.0%. The upside
was primarily due to a 20.0% jump in the number of processed
transactions to 9.2 billion along with a 17.0% increase in
During the reported quarter, GDV increased 14.0% to $986
billion, while worldwide purchase volume rose 13.0% year over
year, on a constant currency basis, to $727 billion. As of
December 31, 2012, MasterCard had issued 1.9 billion
MasterCard-and Maestro-branded cards.
Total operating expenses climbed 2.9% year over year to $996
million, excluding the litigation charges in the year-ago
quarter. On a constant currency basis, operating expenses
increased 4.0% over the prior-year period.
The overall increase primarily resulted from a 19.2%
year-over-year upsurge in depreciation and amortization expenses
along with a 7.0% increase in general and administrative
expenses. However, advertising and marketing expenses fell 7.5%
year over year to $295 million.
Excluding the litigation charges in the year-ago quarter,
operating income increased 18.3% year over year to $899 million
in the reported quarter. Moreover, operating margin marginally
rose to 47.4% from 44.0% in the year-ago quarter. MasterCard's
effective tax rate for the reported quarter was 32.4%, almost in
line with 32.3% in the year-ago period.
Highlights of Full-Year 2012
For full-year 2012, MasterCard reported operating earnings of
$22.04 per share, which exceeded the Zacks Consensus Estimate of
$22.00 as well as $18.70 a share recorded in 2011. Operating net
income for the reported quarter stood at $2.77 billion, up 15.5%
from $2.40 billion in 2011. This excluded after-tax litigation
expense of $13 million or 10 cents recorded in 2012 and $945
million or $3.85 per share recorded in 2011.
Including these, reported net income stood at $2.76 billion or
$21.94 per share in 2012 compared with $1.91 billion or $14.85
per share in 2011. Additionally, total revenue increased 10.1%
year over year to $7.39 billion, which inched past the Zacks
Consensus Estimate of $7.38 billion.
Total operating expenses, excluding the litigation expenses,
rose 6.3% over 2011 to $3.43 billion, while operating margin grew
to 53.5% against 51.9% in 2011. Tax rate lowered to 29.9% in 2012
from 31.8% in 2011, primarily due to benefits from additional
export incentives and conclusion of tax examinations in certain
As of December 31, 2012, MasterCard's net operating cash flow
increased 9.8% over 2011 to $2.95 billion. At the end of 2012,
cash and cash equivalents slightly reduced to $2.05 billion from
$3.73 billion at 2011-end, while long-term debt remained nil.
Meanwhile, retained earnings increased to $7.35 billion at the
end of 2012 from $4.75 billion at the end of 2011. Total equity
rose to $6.93 billion from $5.88 billion as of December 31,
Share Repurchase Update
On June 5, 2012, the board of MasterCard sanctioned a new $1.5
billion share repurchase program for its Class A common stock.
Accordingly, during the reported quarter, MasterCard repurchased
about 1.3 million shares for $613 million. Until January-end,
MasterCard has bought back an additional 322,000 shares for
approximately $165 million since the fourth quarter of 2012.
Till date, about $440 million of stock remains available under
the latest $1.5 billion share repurchase program authorization.
Overall, the company bought back 4.1 million shares worth $1.7
billion in 2012.
On December 4, 2012, the board announced a regular cash
dividend of 30 cents per share, which will be paid on February 8,
2013, to shareholders of its Class A common stock and Class B
common stock as on January 9, 2013.
On November 9, 2012, MasterCard paid a regular cash dividend
of 30 cents a share to shareholders of its Class A common stock
and Class B common stock as on October 10, 2012.
Other strong performers in the payment processing industry
Heartland Payments System Inc.
), both carrying a Zacks Rank #1 (Strong Buy) stocks, are
scheduled to release results before the opening bell on February
7, 2013 and after market closes on February 6, 2013,
Last week, another electronic payment processor and merchant
Total System Services Inc.
) - a Zacks Rank #2 (Buy) stock - reported fourth-quarter 2012
operating earnings of 32 cents per share, a penny below the Zacks
Consensus Estimate and 3.4% higher than the year-ago quarter's
earnings of 31 cents per share. Results benefited from higher
number of accounts on file and new client growth, partially
offset by higher operating expenses. MasterCard carries a Zacks
Rank #2 (Buy).
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