NEW YORK, N.Y. – Payments processor MasterCard Inc. said that its profit and revenue rose in the first quarter as card users spent more. Profit beat the forecasts of Wall Street analysts, though revenue missed slightly and the company’s stock fell in midday trading.
Company executives sketched a picture of a mixed global economy and a U.S. consumer suffering from the payroll tax hike that took effect in January. The results showed stronger growth outside the U.S. than at home, with purchases in Asia, the Middle East and Africa growing the most.
The Purchase, N.Y., company does business all over the world, and its results are a window into how people are spending — and how they’re feeling about the economy — on all different income levels.
In the U.S., consumer spending was relatively strong in January after a weak holiday season, MasterCard executives said. But it slowed in February and March, and MasterCard leaders guessed that was because consumers were registering the effect of the higher payroll taxes, a result of negotiations over the federal budget in Washington.
The U.S. economy in the first quarter “was definitely very choppy,” MasterCard Chief Financial Officer Martina Hund-Mejean said in an interview with The Associated Press. She expects the current quarter to be muted as well.
“We have still a very high unemployment rate, housing is just starting to get better, all the discussion in Washington about the fiscal debt — that makes people feel uncomfortable,” Hund-Mejean said. “So there are a number of things that are not resolved.”
CEO Ajay Banga said he was pleased that the first-quarter results met the company’s own expectations, despite the “challenging economic conditions.” He said U.S. consumers had also been hurt in the first quarter by high prices for food and gas, as well as winter storms in March.
Sterne Agee analyst Greg Smith described the quarter as “a slow start,” with some measures of revenue lighter than he expected. Overall, though, results were in line with expectations, Smith said in a note to clients. A lower-than-expected tax rate helped, and he noted that the year-ago quarter was particular strong, meaning the company had a tough comparison to meet.
MasterCard is trying to elbow its bigger rival Visa out of the way for market share in the debit card business, but Visa has stepped up efforts to regain lost ground. Spending on MasterCard-branded debit cards rose more than spending on credit and charge cards.
MasterCard is also focusing on developing countries, where most transactions are still done in cash. The company has been expanding in the region that includes Asia, the Middle East and Africa, and signed an agreement to “explore opportunities” in China.
Purchases in Asia, the Middle East and Africa grew 20 per cent over the year measured in U.S. dollars, 13 per cent in Europe and almost 11 per cent in Latin America. In the U.S., growth was just 4 per cent.
MasterCard earned $766 million in the first three months of the year, up 12 per cent from the same period a year ago, the company reported Wednesday. That worked out to $6.23 per share, beating the $6.18 per share expected, on average, by analysts polled by FactSet.
Revenue rose 8 per cent to $1.9 billion, slightly less than the $1.93 billion forecast by financial analysts who follow the company.
MasterCard’s stock fell $13.11, or 2.4 per cent, to close at $539.82 Wednesday. Shares have traded between $389.90 and $552.93 in the past 52 weeks, and are up about 10 per cent since the start of the year.