MasterCard Is Stabilizing

MasterCard's net income for the third quarter came in at $452 million, or $3.45 per share. That was up from a loss of $1.48 per share in the same period last year, but last year's results held one-time litigation payments to Discover Financial (NYSE: DFS) and American Express (NYSE: AXP). Visa had to do the same last year after Discover and AmEx accused Visa and MasterCard of bullying banks into issuer exclusivity. Visa and MasterCard still dominate cards issued by big banks like Bank of America (NYSE: BAC) and Citigroup (NYSE: C), although the dominance isn't quite exclusive. B of A, for example, now issues a card in conjunction with American Express.

But back to MasterCard. Here's how the most important statistic -- dollar volume -- fared over the past several quarters:

Now, these growth rates are calculated on a U.S. dollar basis. However, MasterCard does a big chunk of its business overseas. If calculated on a local currency basis, volume would have been about flat in the most recent quarter. All of this means is that the global consumer is healthier than this table shows, but it doesn't show up for MasterCard investors since that strength gets washed out by currency conversions. This, though, isn't likely to last for long, especially if you expect the U.S. dollar to weaken over the long term. And who among us doesn't?

Plus, just like Visa, total processed transaction growth is still humming along:

Put the two together, and we get that global consumers are using plastic more than ever, and spending on that plastic is starting to stabilize. And if volume growth so much as stabilizes, but transactions processed continue to increase, earnings power not only remains intact, but earnings growth does as well. How many other businesses can say that today? Very few. That's why investors are right to love these companies.

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