Bloomberg News

MasterCard Falls as Profit Misses Estimates on Higher Expenses

January 31, 2014

MasterCard Inc. (MA:US) fell the most in almost 2 1/2 years after reporting profit that missed analysts’ estimates as rebates to card issuers fueled a jump in expenses.

MasterCard, the second-largest U.S. payments network, slid 5.2 percent to $75.64 at 10:49 a.m. in New York after tumbling as much as 10 percent, the biggest intraday decline since August 2011. Operating expenses, excluding a one-time charge tied to litigation, rose 11 percent to $1.1 billion from a year earlier, the Purchase, New York-based company said today in a statement.

Rebates were “even higher than expected,” Jason Kupferberg, an analyst at Jefferies Group LLC, said in a note to clients. “We view the pullback as an especially good buying opportunity.”

Chief Executive Officer Ajay Banga, 54, is upgrading technology as MasterCard competes with larger rival Visa Inc. for deals with card-issuing banks. The expense increase “was primarily driven by higher investments in people and marketing to support strategic initiatives,” according to the statement.

Fourth-quarter net income rose 3 percent to $623 million, or 52 cents a share, from $605 million, or 49 cents, adjusted for a stock split, a year earlier, MasterCard said. Profit excluding one-time items was 57 cents a share, missing the 60-cent average estimate (MA:US) of 29 analysts surveyed by Bloomberg.

Visa declined 1.6 percent to $217.43. The Foster City, California-based firm said yesterday that quarterly profit rose 8.8 percent to $1.4 billion.

Costs Rise

MasterCard signed more deals with card issuers in the quarter than anticipated and expects to return to normal levels this year, Chief Financial Officer Martina Hund-Mejean said on a conference call.

Net revenue rose 12 percent to $2.1 billion as cross-border volume, a measure of spending by consumers traveling abroad, advanced 18 percent, the company said. Hund-Mejean said 2014 net revenue will be on the lower end of the company’s three-year forecast of 11 percent to 14 percent.

MasterCard and Visa last month won approval for a $5.7 billion settlement that ended years of litigation (MA:US) with merchants over allegations that credit-card swipe fees are improperly fixed. The settlement, once worth as much as $7.25 billion, was valued at about $5.7 billion as of August after about 8,000 merchants dropped out of the damages portion.

Discover Financial Services reported Jan. 23 that fourth-quarter net income rose 12 percent to $602 million as credit-card spending and loan demand rose. American Express Co. (AXP:US), the biggest credit-card issuer by purchases, said Jan. 17 fourth-quarter profit doubled on higher consumer spending.

To contact the reporter on this story: Elizabeth Dexheimer in New York at edexheimer@bloomberg.net

To contact the editor responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net


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Companies Mentioned

  • MA
    (MasterCard Inc)
    • $75.83 USD
    • 0.36
    • 0.47%
  • AXP
    (American Express Co)
    • $94.47 USD
    • 0.01
    • 0.01%
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