MasterCard Inc. (MA), the world’s second- biggest payments network, climbed the most since August as an increase in card spending helped the firm’s third-quarter profit beat analysts’ estimates.
The stock advanced 7 percent to $357.66 in New York, the highest close since MasterCard’s May 2006 initial public offering. Net income rose 38 percent to $717 million, or $5.63 a share, from $518 million, or $3.94, a year earlier, the Purchase, New York-based firm said today in a statement. The average estimate of 29 analysts surveyed by Bloomberg was $4.82.
Chief Executive Officer Ajay Banga, 51, is pushing to wrest market share from larger rival Visa Inc. (V) New U.S. regulations on transaction fees charged to merchants for debit-card purchases also give retailers more say on how those transactions are routed, which may erode Visa’s dominance.
“There are still a lot of moving pieces in the U.S. debit landscape,” Banga said on a call with analysts after earnings were announced. “We are in a completely different competitive situation from others in the debit space and do not have the need to defend a large incumbent position.”
Debit-card spending in the U.S. increased 23 percent to $97 billion and surged 35 percent in international markets to $62 billion, MasterCard said in the statement. Credit-card spending worldwide rose 21 percent to $469 billion from $389 billion a year earlier.
MasterCard surged 60 percent this year, the top performance in the 75-company Standard & Poor’s 500 Information Technology Index. San Francisco-based Visa has gained 30 percent.
“MasterCard continues gaining global processing share, particularly in Europe, where it is the leading debit brand,” Andrew Jeffrey, an analyst with SunTrust Robinson Humphrey Inc., wrote in a note to clients today. “We expect share gains to continue, although at a more moderate pace.”
Net revenue increased 27 percent to $1.8 billion, according to the statement. Revenue in the U.S. grew at 19 percent compared with MasterCard’s revenue in the rest of the world, which increased 33 percent, Chief Financial Officer Martina Hund-Mejean said in a phone interview.
Operating expenses rose 23 percent to $816 million because of costs tied to acquisitions and investments in technology, the company said.
Worldwide spending on MasterCard- and Maestro-branded cards increased 17 percent to $628 billion, based on local currencies, according to the statement. Spending by consumers outside their home countries surged 19 percent. Processed transactions rose 21 percent.
Visa, the world’s biggest payments network, said last week that quarterly profit rose 14 percent to $880 million, or $1.27 a share, as credit-card spending climbed faster than debit and affluent consumers stepped up purchases.
MasterCard repurchased 250,100 shares valued at $77 million in the third quarter as part of a buyback program that has $879 million remaining, the firm said.
MasterCard has estimated a “reasonably possible loss” of at least $500 million if there’s a negotiated settlement with all plaintiffs in ongoing price-fixing cases, Banga said. Merchants including Publix Super Markets Inc., Rite Aid Corp. and Liberty Interactive Group have filed individual suits against the firm and a class-action suit is pending.
“While we’ve made substantial progress with the individual merchant plaintiffs, there has not been similar progress with the class plaintiffs,” Banga said. “At this time, it is not possible to put an upper limit on this loss due to the significantly higher demands by the class plaintiffs, which are unacceptable to MasterCard.”