There's simply no stopping MasterCard and Visa. Both credit card giants are well on their way to becoming two of the Street's best performers for the first half, especially after this week's earnings reports. MasterCard shares rose almost 15 percent today after first-quarter profits more than doubled. Since Visa's May 19 initial public offering, its shares have surged more than 70 percent.
International growth is a big part of both stories, with half MasterCard's quarterly revenue coming from outside the United States. Foreign payments are adding to profits as the U.S. dollar remains weak.
Fresh off last month's record-breaking $19 billion IPO, Visa is getting the same boost from the same trend, as shown by its first-ever quarterly results, issued Monday. While analysts note the No. 1 card issuer has not been aggressive internationally, its payment volumes rose 19 percent in the quarter despite some worries over a tougher economy. That's not bad considering Visa predicted earnings growth of 20 percent a year through 2010.
The bottom line for both is this: Transaction volumes are rising, and while credit card companies may be exposed to a slowdown in consumer spending, they're free of problems in credit and housing that are stifling gains in the rest of the financial sector. Credit card issuers don't offer credit or act as a bank. Instead, they wring profits from fees on individual transactions.
A quick glimpse of the quarter:
Earnings of $2.59 a share—a huge 59 cents above the Wall Street consensus.
Revenue of $1.18 billion, almost 30 percent above last year.
Price today: $275.90 a share
Price target (according to Wachovia): $275-$289
Earnings of 52 cents a share vs. estimates of 45 cents.
Revenue up 22 percent to $1.5 billion.
Price today: $77.40 a share
Price target (according to UBS): $88