MasterCard Inc. posted first-quarter profit that beat analysts' estimates as consumer-card spending accelerated outside the U.S.
Net income climbed 17% to $1.02 billion, or 89 cents a share, from $870 million, or 73 cents, a year earlier, the Purchase, New York-based company said today in a statement. The average estimate of 26 analysts surveyed by Bloomberg was 80 cents a share. Revenue rose 2.7% to $2.23 billion, falling short of analysts' estimates.
MasterCard, led by Chief Executive Officer Ajay Banga, is benefiting as consumers replace cash and checks with electronic payments. MasterCard has expanded technology offerings to merchants, partnered with governments and acquired smaller firms as it seeks to increase customer spending outside the U.S., where it generates most of its revenue.
"Their strength has been in their non-U.S. regions and that should continue," Lisa Ellis, an analyst at Sanford C. Bernstein & Co., said before results were released. "There's more creativity around their strategy in terms of developing local markets for the long-term."
MasterCard gained 1.7% to $91.80 at 8:36 a.m. in early trading in New York. The shares climbed 4.7% to $90.23 this year through Tuesday, outpacing the 1.9% advance of larger rival Visa Inc.
A strengthening U.S. dollar continues to hurt revenue gains overseas even as purchase volume increases. Purchases made outside the U.S., including cash advances, fell 0.3% in the first quarter from a year earlier when converted to U.S. currency. Spending in the U.S. and the Asia-Pacific region accelerated, while volume in Europe and Latin America decreased.
Cross-border volume, a measure of customer spending abroad, rose 19% from a year earlier, while operating expenses fell 1% to $879 million. Revenue gains were partially offset by an increase in costs tied to winning new deals as rebates and incentives rose 19% to $881 million, the company said.
MasterCard struck a deal last month with Citigroup Inc. for the bank to issue most of its consumer credit and debit cards on MasterCard's network. The firm has also announced new acquisitions, including this week's $600 million purchase of Applied Predictive Technologies Inc., which helps merchants measure marketing and operations efforts using cloud-based analytics.
"We are managing well, despite a mixed economic environment and challenging currency situation," Banga said in the statement. "The underlying fundamentals of our business remain unchanged."
MasterCard and Visa stand to benefit after China's government indicated this month it plans to end a monopoly in bank-card clearing by publishing new rules that take effect June 1. China UnionPay Co. is currently the sole clearing service provider for yuan-denominated payments.