MasterCard Inc. (MA:US), the second-biggest U.S. payments network, reported a third-quarter profit that beat analysts’ estimates as a stronger euro helped boost revenue.
Net income (MA:US) rose 14 percent to $879 million, or $7.27 a share, from $772 million, or $6.17, a year earlier, the Purchase, New York-based firm said today in a statement. The average estimate of 31 analysts (MA:US) surveyed by Bloomberg was $6.94.
Shares of MasterCard, led by Chief Executive Officer Ajay Banga, 53, have outpaced bigger rival Visa Inc. (V:US) this year. Signs of a pickup in European consumer spending and a strengthening currency may increase the company’s valuation relative to Visa, said Jason Kupferberg, an analyst at Jefferies Group LLC.
If Europe continues to recover from its sovereign-debt crisis, “that could cause a shift in sentiment to more favoritism potentially for MasterCard over Visa,” Kupferberg said in a phone interview before results were announced. “Whenever you see the euro strengthening against the dollar, that helps MasterCard’s top line for sure.”
MasterCard rose 0.3 percent to $728.15 at 10:43 a.m. in New York, while Visa slid 4.5 percent to $194.69, the most intraday since July 31. MasterCard has gained 48 percent this year, outpacing Visa’s 28 percent advance and the 17 percent increase for the Standard & Poor’s 500 Information Technology Index.
Spending on credit and debit cards in Europe rose 14 percent to $218 billion from a year earlier, according to the statement. In the U.S., purchases increased 9.2 percent to $267 billion. Cross-border volume, a measure of spending by consumers traveling abroad, increased 19 percent, MasterCard said.
“Given the kind of economic environment that we’re in, in the United States but also in the rest of the world, these are some pretty nice results,” Chief Financial Officer Martina Hund-Mejean said in a phone interview.
Net revenue rose 16 percent to $2.2 billion as worldwide purchases increased 14 percent to $763 billion from a year earlier, according to the statement. Operating expenses climbed 14 percent to $970 million.
Investors previously viewed Europe as “more of a liability than an asset” for MasterCard, Kupferberg said. Europe accounted for 28 percent of MasterCard purchases in the three months through June 30, company data show. Visa generates about 2 percent of its revenue (V:US) on the Continent as domestic transactions are handled by Visa Europe Ltd., a separate firm owned by banks that pays royalties to its U.S.-based namesake.
The euro advanced 4 percent against the greenback in the three months ended Sept. 30. MasterCard’s gross dollar volume, which includes card purchases and cash transactions at automated teller machines, climbed 15 percent in Europe in the first nine months of 2013 from a year earlier, according to the statement.
“MasterCard is in a great position in Europe because we’re very strong in the North in the strong economies and we’re also extremely strong over in the Eastern bloc,” Ann Cairns, president of international markets, said last month at an investor conference. “And we’re lesser exposed in the Southern economies that are still having difficulties.”
Visa said yesterday that fiscal fourth-quarter profit climbed 15 percent on an adjusted basis to $1.19 billion from a year earlier, when results were aided by a $627 million tax adjustment. The Foster City, California-based company said net operating revenue rose 8.9 percent to $2.97 billion, missing the $3.02 billion average estimate of analysts surveyed by Bloomberg.
American Express (AXP:US), the biggest credit-card issuer by purchases, said Oct. 16 third-quarter net income rose 9.3 percent to $1.37 billion on higher spending worldwide. Discover Financial Services (DFS:US), the No. 4 network, said last week that profit fell 6.9 percent as the firm boosted the amount of money set aside to cover future loan losses.
To contact the reporter on this story: Elizabeth Dexheimer in New York at email@example.com
To contact the editor responsible for this story: Peter Eichenbaum at firstname.lastname@example.org