Bloomberg News

MasterCard Net Income Misses Estimates as Expenses Increase (1)

January 31, 2014

MasterCard Inc. Credit and Debit Cards

MasterCard Inc. profit excluding one-time items was 57 cents a share, missing the 60-cent average estimate of 29 analysts surveyed by Bloomberg. Photographer: Andrew Harrer/Bloomberg

MasterCard Inc. (MA:US), the second-biggest U.S. payments network, reported fourth-quarter profit that missed analysts’ estimates as expenses climbed. The shares fell 5.6 percent in early trading.

Net income rose 3 percent to $623 million, or 52 cents a share, from $605 million, or 49 cents, adjusted for a stock split, the Purchase, New York-based firm said today in a statement. Profit excluding one-time items was 57 cents a share, missing the 60-cent average estimate (MA:US) of 29 analysts surveyed by Bloomberg.

The increase in expenses “was primarily driven by higher investments in people and marketing to support strategic initiatives,” the company said in the statement.

MasterCard, led by Chief Executive Officer Ajay Banga, 54, is bolstering dividends and repurchasing shares amid a global shift to electronic payments from cash. MasterCard, which generates the majority of its revenue outside the U.S., raised its quarterly dividend 83 percent last month, announced a 10-for-1 stock split and authorized repurchasing as much as $3.5 billion.

MasterCard fell to $75.33 at 8:38 a.m. in New York. The shares increased 55 percent in the past year through yesterday’s close of trading, outpacing the 21 percent advance of the 65-company Standard & Poor’s 500 Information Technology Index.

Costs Rise

Operating expenses, excluding a one-time charge related to settling merchant litigation, climbed 11 percent to $1.1 billion from $966 million a year earlier, according to the statement. MasterCard spent more on rebates and incentives tied to signing deals with card issuers, the firm said.

“The notorious lumpy rebate line was even higher than expected,” said Jason Kupferberg, an analyst at Jefferies Group LLC in a note. “Our initial look shows no reason for significant concern. We view the pullback as an especially good buying opportunity.”

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. Processed transactions increased 13 percent to 10.4 billion, the company said.

MasterCard and larger rival Visa Inc. last month won approval for a $5.7 billion settlement that ended years of litigation 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.

Visa said yesterday fiscal first-quarter profit rose 8.8 percent to $1.41 billion, beating analysts’ estimates. Discover Financial Services (DFS:US) 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., 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: Steven Crabill in New York at scrabill@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)
    • $87.77 USD
    • 0.14
    • 0.16%
  • DFS
    (Discover Financial Services)
    • $65.95 USD
    • -0.22
    • -0.33%
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