Mastercard Revenue Hurt by Distancing, Border Restrictions -- Update
October 28 2020 - 5:47PM
Dow Jones News
By Allison Prang
Credit-card companies Mastercard Inc. and Visa Inc. reported
double-digit declines in their revenue Wednesday, as the pandemic
continued to weigh on results.
Mastercard's revenue fell 14% from a year earlier to $3.84
billion, hurt by a steep dive in cross-border volume, meaning
payments cardholders make outside of the country where the card was
issued. Cross-border volume on a local-currency basis tumbled
36%.
Chief Financial Officer Sachin Mehra said the drop in those
volumes was "due to the effects of border restrictions and social
distancing measures." Mastercard's revenue missed the estimate of
$3.95 billion from analysts polled by FactSet.
"As travel starts to come back, we'll see personal travel...come
back sooner than business travel," Mr. Mehra said on the company's
earnings call. "And that should be tied to how we see the evolution
of the Covid vaccine and the therapeutics taking place."
"While we have seen some improvement in travel within the
[European Union] during the quarter, cross-border travel outside
the EU has shown only limited recovery," Chief Executive Ajay Banga
said.
Mastercard logged $1.51 billion in profit and said earnings were
$1.51 a share. That compares to net income of $2.11 billion, or
$2.07 a share, a year earlier. Adjusted earnings were $1.60 a
share. According to FactSet, analysts were expecting $1.65 a
share.
Shares of Mastercard, which reported results before the market
opened Wednesday, fell 8.1% to $291.38 a share.
Visa's revenue tumbled 17% to $5.1 billion, but was still above
the analyst consensus from FactSet of $5 billion. Cross-border
volume fell 29% on a constant-dollar basis.
"Overall cross-border spending remains depressed, led by travel
spending, as the majority of borders remain closed," the company
said.
Visa said earnings were $2.14 billion, down 29% from a year
earlier. Earnings were 97 cents a share and adjusted earnings were
$1.12 a share. According to FactSet, analysts were expecting
adjusted earnings of $1.09 a share.
Shares of Visa rose 0.35% in after-hours trading.
While travel is taking a hit from the coronavirus pandemic,
contactless payments are growing in popularity. Contactless
penetration was 41% of in-person purchase transactions in the third
quarter, Mastercard President Michael Miebach said. In the second
quarter, it was 37%, and a year ago it was 30%, he said.
"We believe that as the economies reopen, people will shop in
stores again. But e-commerce will remain elevated from pre-pandemic
levels as behaviors have changed and payment preferences have
shifted," Mr. Miebach said.
American Express Co., which reported results last week, logged a
69% drop in travel and entertainment spending.
Write to Allison Prang at allison.prang@wsj.com
(END) Dow Jones Newswires
October 28, 2020 17:32 ET (21:32 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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