Mastercard Posts Higher-Than-Expected Revenue, EPS

By AnnaMaria Andriotis Features Dow Jones Newswires

Mastercard posted higher-than-expected revenue and earnings per share for the first quarter due to an increase in transactions and volume growth on its network.

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The card network also reported an increase in expenses as it continues to invest in digital payment technology and security features to bring down fraud in the card space.

Net revenue totaled $2.73 billion, up 12% from a year prior. Earnings per share came in at $1, or $1.01 when adjusted to exclude an item related to Canadian merchant litigation. Analysts expected $2.65 billion in revenue and $0.95 in earnings per share. Net income totaled $1.1 billion, just shy of analyst estimates. Mastercard's shares rose around 1.6% in early trading Tuesday.

Net revenue increased in part because of a rise in the dollar amount of transactions processed over Mastercard's network. Gross dollar volume passing over the network worldwide was $1.18 trillion, up 5% from a year prior. Net revenue also increased due to a rise in card transaction volume from cardholders traveling abroad, for which Mastercard derives larger fees.

Net revenue increases were partially offset by a rise in rebates and incentives. They rose 23% from the first quarter last year to $1.28 billion, although that was below some analysts' expectations.

Mastercard pays incentives for new agreements with banks that issue cards for transactions that run over its network. Those incentives can include marketing costs. There were 2.4 billion Mastercard cards in existence as of the first quarter, up 5% from a year prior.

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Mastercard Chief Executive Ajay Banga said on the earnings call that the company in the U.S. renewed certain card agreements with Capital One, Bank of the West and Citizens Financial.

While revenue rose, so, too, did expenses; at $1.2 billion they were up 12% from the year-earlier period. That was the result of ongoing investment in digital, including digital payment platform Masterpass. This platform is meant to speed up people's purchases.

The biggest increase in expenses occurred in advertising and marketing. Those costs were also connected to ongoing efforts to expand Masterpass usage.

Meanwhile, Mastercard completed the acquisition of VocaLink last week, after a U.K. regulator cleared the way for the deal earlier in April. VocaLink is one of the primary ATM network providers in the U.K., and its technology also allows for real-time payments from one account to another.

That leaves the door open for new types of consumer payment scenarios to occur over Mastecard's system.

"We believe that the combination of card rails and account rails will enable us to look at payments more holistically that have to be done in the retail space" the business-to-business and person-to-person space, finance chief Martina Hund-Mejean said in an interview.

Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com

(END) Dow Jones Newswires

May 02, 2017 10:41 ET (14:41 GMT)