MasterCard Earnings Beat Estimates as Card Spending Climbs

  • Per-share earnings of 86 cents beat estimates by one cent
  • Quarterly revenue climbs almost 10% while expenses surge 25%

MasterCard Inc., the second-largest U.S. payments network, reported profit that beat analysts’ estimates as card spending increased.

First-quarter net income fell 6 percent to $959 million, or 86 cents a share, from $1.02 billion, or 89 cents, a year earlier, the Purchase, New York-based company said Thursday in a statement. The average estimate of 32 analysts surveyed by Bloomberg was for profit of 85 cents a share, after the company signaled earlier this year that costs would climb.

“Our business and the underlying fundamentals are strong across the board, in the U.S. as well as in Europe,” Chief Financial Officer Martina Hund-Mejean said in a phone interview. “We see good performance by the consumer. It seems like people are feeling OK.”

Chief Executive Officer Ajay Banga has been investing in technology to counter the impact of lower gas prices in the U.S., which hurt domestic spending on the firm’s network. Foreign-exchange headwinds began to moderate in the first three months of the year, fueling cross-border payment volume at MasterCard, which generates roughly 60 percent of its revenue overseas.

MasterCard rose 1 percent to $99.31 at 11:30 a.m. in New York, the highest level since December. The stock advanced 1.1 percent this year through Wednesday.

January Forecast

Revenue increased 9.7 percent to $2.45 billion, topping the $2.38 billion estimate of analysts in the Bloomberg survey, as expenses jumped 25 percent to $1.1 billion. Purchase volume increased 12 percent to $838 billion.

In January, MasterCard said expenses will climb in “the high single-digit range” as the company spends more money on technology offerings abroad, including in China. At its investor day last year, the firm forecast slower growth in earnings per share from 2016 to 2018 compared with the previous three-year period. Revenue growth is expected to increase at a “low double-digits” pace, the company said, compared with 11 percent to 14 percent in the earlier period.

Rebate and incentive spending increased, mostly due to new and renewed partnerships and higher volume, the company said. Consumers now demand better rewards, and merchants continue to seek improved terms, putting pressure on networks and banks.

Still, “you should expect rebates and incentives for the year as a whole to be a little lower than what you saw last year,” Banga said in a conference call with analysts on Thursday.

Competitive Space

Visa Inc., the largest payments network, posted fiscal second-quarter profit last week that beat analysts’ estimates as consumer card spending increased. American Express Co., the biggest credit-card issuer by purchases, said first-quarter profit fell 6.5 percent to $1.43 billion as the company spent more to lure new customers.

MasterCard’s European purchase volume climbed 9 percent in the first quarter. The segment has long been seen as a source of strength for MasterCard, which owns its European business. To counter MasterCard’s growth in the region, Visa announced last year that it would acquire Visa Europe Ltd. Visa said last week the purchase may be delayed after it had to amend terms to appease regulators.

"We grow, from a volume perspective, in the mid-teens in Europe; it’s very high growth," Hund-Mejean said. "That means we have very good relationships and we do believe that we are going to be able to continue to expand those kinds of relationships as Visa is working through that relatively large acquisition that they are undertaking."

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