Higher-than-expected costs and rebates caused MasterCard’s quarterly earnings to fall short of Wall Street forecasts yesterday, driving shares of the world’s second biggest credit card network down 10.3 per cent to $222.1.
The shares hit a two-and-a-half-month low despite a 23 per cent jump in fourth-quarter profit.
A weak US dollar and rebound in global debit and credit card spending late last year boosted revenues, but MasterCard’s results paled next to those of rival Visa, which well surpassed expectations late on the day before. MasterCard’s 25 per cent jump in advertising and marketing expenses, as well as a 35 per cent spike in rebates and incentives, surprised some analysts.
MasterCard chief executive Robert Selander, however, noted the company telegraphed higher costs
in the holiday period, and expects to ramp up marketing later this year.
“We view that as taking advantage of some emerging opportunities and positioning ourselves ... for an improved future,” Selander said. “On the other hand, if it doesn’t turn out that there’s a good [economic] recovery, we may have to rethink ... that expense line.”
The company, which has benefited as shoppers globally increasingly replace cash and checks with plastic, said its economic outlook for early 2010 is “conservative”, adding it expects “meaningful” global economic improvement in the second half of the year.
MasterCard earned $294.4m in the period to 31 December, up from $239.4m a year earlier. It logged an after-tax severance charge that shaved earnings by 19 cents per share.
MasterCard and its peers operate payment networks, but do not issue cards or process transactions.