Mastercard Results Beat Estimates as Consumers Boost Spending -- 3rd Update
July 27 2017 - 10:45AM
Dow Jones News
By AnnaMaria Andriotis
Mastercard Inc. reported stronger-than-expected earnings and
revenue for the second quarter as consumers boosted their
spending.
Mastercard CEO Ajay Banga said on the company's earnings call
that Kroger, the largest traditional grocery chain in the U.S. by
sales, will be converting its co-brand credit card program to the
Mastercard network. That is a switch from the Visa Inc. network
that the cards have been running on. Mr. Banga said the issuer
remains U.S. Bank. The card program will launch by the end of 2017,
with new cards to be issued by spring 2018.
Profit for the second quarter increased 20% to $1.18 billion, or
$1.10 a share, from $983 million, or 89 cents a share, a year
earlier. Analysts polled by Thomson Reuters expected profit of $1.1
billion and earnings per share of $1.04.
Mastercard shares edged down 0.9%. The stock closed Wednesday at
a record high of $130.99.
Net revenue increased 13% to $3.1 billion from a year prior,
also beating analysts' estimates. That was fueled by an ongoing
rise in gross dollar volume transactions occurring on the
Mastercard network, which increased 6% worldwide to $1.28 trillion
in the second quarter from the year prior. Mastercard, like Visa,
is a major network on which credit card and debit card transactions
are processed.
The company also benefited from an increase in cardholders using
Mastercard cards outside of the country they are issued in. Those
"cross-border" volume fees increased 14% from a year prior to $984
million. Also up are the number of transactions occurring on its
network rather than on domestic networks in foreign markets. Those
"switched transactions" increased 17% from a year prior.
Mr. Banga said Mastercard is finalizing its latest application
to enter the Chinese domestic market. The company is reviewing
several options including filing a sole application or pursuing a
"joint venture" with another company. "What's really important here
is to get it right out of the gate," he said.
Visa's CEO Al Kelly said last week that the company filed an
application with the People's Bank of China for a domestic license.
The U.S. and Chinese governments reached an agreement in May that
is supposed to result in more access to the Chinese economy for
electronic-payments providers. That reignited hopes that Visa and
Mastercard may get more market share in China.
The companies are benefiting from a booming card market as more
consumers switch to using cards or paying with phones that are
linked to cards. The rise in online shopping also helps card
companies.
In the U.S., credit card spending and debt is on the rise,
fueled in part by the ongoing rewards wars as issuers offer more in
points and cash back to consumers.
Operating expenses continued to rise as the company pays out
more in advertising and marketing and shares in more costs with
card issuers on rewards programs. They increased 7% from a year
prior, but when excluding litigation costs that the company
incurred a year prior, total adjusted operating expenses increased
17% on a currency-neutral basis.
Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com
(END) Dow Jones Newswires
July 27, 2017 10:30 ET (14:30 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Visa (NYSE:V)
Historical Stock Chart
From Aug 2024 to Sep 2024
Visa (NYSE:V)
Historical Stock Chart
From Sep 2023 to Sep 2024