By Robin Sidel And Chelsey Dulaney
MasterCard Inc. reported a stronger-than-expected 17% jump in
first-quarter profit as the payments network posted higher purchase
volumes and reduced operating expenses.
Still, the Purchase, N.Y.-based company warned that its results
are likely to be pressured the rest of the year by the strong U.S.
dollar and recent weakness in the euro and the Brazilian real.
Lower gasoline prices in the U.S. are also continuing to take a
bite out of consumer spending.
The company now anticipates "more significant headwinds from
(foreign exchange) than we expected in January," said MasterCard
Chief Financial Officer Martina Hund-Mejean in a conference call
with analysts.
In all, the company posted earnings of $1 billion, or 89 cents a
share, up from $870 million, or 73 cents a share, in the prior-year
period.
Revenue rose 2.7% to $2.23 billion, slightly below Wall Street
expectations.
Analysts had projected 80 cents a share in profit and $2.28
billion in revenue, according to Thomson Reuters.
Shares of MasterCard, up 25% in the past year, were up $1.49, or
1.7%, to $91.72 in morning trading on the New York Stock
Exchange.
"We think investors will breathe a modest sigh of relief that
(foreign exchange) did not damage the model's ability to translate
higher-than-typical top line growth into (earnings-per-share)
growth outperformance," John Williams, an analyst at Topeka Capital
Markets wrote in a note to clients.
The results come as the picture has brightened somewhat for U.S.
consumers, while global economic uncertainties are heightened by a
strengthening dollar and falling oil prices.
Although MasterCard's underlying business fundamentals remain
strong, "currency moves have added to the challenges," Chief
Executive Officer Ajay Banga said in the conference call.
Mr. Banga also said that U.S. consumers are continuing to use
much of their savings at the gas pump to reduce debt and bolster
savings accounts. Neither trend benefits MasterCard, which makes
its money when people make purchases on their debit and credit
cards.
Overall, however, "I feel like consumers are optimistic because
they are seeing savings from the gas price," Mr. Banga said. He
also noted that the sale of luxury goods in the U.S. has slowed
from last year.
MasterCard processes electronic payments on its network, but
doesn't collect interest or set interest rates.
In the latest quarter, purchase volume rose 12%, in terms of
local currency, to $783 billion.
Processed transactions rose 12% to 11 billion, while
cross-border volumes grew 19%. MasterCard said gross dollar volume
rose 12% to $1.1 trillion on a local-currency basis, though
increases in rebates and incentives partially offset this
growth.
A 1% drop in operating expenses, helped by currency hedging,
boosted the bottom line.
The company has looked to expand into markets dominated by rival
Visa Inc. and in November announced plans to launch a debit-card
service in Canada this year. Visa is scheduled to report results
Thursday.
Write to Robin Sidel at robin.sidel@wsj.com and Chelsey Dulaney
at Chelsey.Dulaney@wsj.com
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