MasterCard Profits Slide But Beat Expectations

The card payments company reported a 6% decline in profit but revenue climbed.
Matthew HellerApril 28, 2016

Currency impacts helped weigh down MasterCard’s first-quarter earnings but revenue rose 9.7% from a year ago as card transactions increased 14% to 12.6 billion.

MasterCard on Thursday reported a profit of $959 million, or 86 cents a share, down 6% from $1.02 billion, or 89 cents, a year earlier. Revenue climbed to $2.45 billion from $2.23 billion.

Analysts had projected 85 cents in per-share profit on $2.38 billion in sales. According to The Motley Fool, the earnings decline was expected because of the impact of the strong dollar and the non-recurrence of a tax credit but “most of the signs of the card company’s fundamental strength remain intact.”

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“The year is off to a good start with solid growth in revenue due to strong volume and transaction levels this quarter,” MasterCard CEO Ajay Banga said in a news release. “We continue to deliver against our strategy, looking to our investments and acquisitions to create a better cardholder experience, supported by a relentless commitment to security.”

“Our encryption and token services are helping to support new ways to pay in an increasingly digital world, while our [Applied Predictive Technologies] and Pinpoint [loyalty and rewards services] businesses are helping to drive stronger connections between merchants and their customers,” he added.

MasterCard’s cross-border volumes grew at a 12% pace, while gross dollar volumes on a local currency basis climbed 13% to $1.1 trillion. Worldwide purchase volumes gained 12% in local currency terms, working out to $838 billion, and 2.3 billion MasterCard-issued cards were in customers’ hands.

Operating expenses rose 25%, reflecting in part differences in the way that foreign exchange hedges were made between the most recent and year-ago quarters and greater investments to support strategic initiatives.

“While higher rebates and promotional activity helped the top line, such discounting bit into earnings,” The Wall Street Journal noted.