MasterCard earnings beat as Visa profits decline

Reuters with CNBC.com
Norm Betts | Bloomberg | Getty Images

MasterCard reported earnings on Thursday that topped analysts expectations, a day after larger rival Visa posted lower profit, mainly due to a tax provision.

MasterCard, the world's No.2 credit and debit card company, reported a 14 percent rise in quarterly profit as more people across the world used plastic instead of cash.

MasterCard and larger rival Visa have been trying to capture new business in emerging markets, where cash payments still dominate but use of cards is growing at a fast pace.

MasterCard's worldwide purchase volume increased 14 percent on a local currency basis to $763 billion.

Annual growth in MasterCard's U.S. purchase volumes rose 9 percent to $267 billion from a year earlier.

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Consumer confidence in the United States reached a six-year high in the third quarter as prospects for jobs and personal finances improved.

MasterCard shares rose about 1 percent to $730.45 in pre-market trading on Thursday.

"We had another good quarter with growth across all geographies," Chief Executive Ajay Banga said in a statement.

MasterCard's net income rose to $879 million, or $7.27 per share, in the third quarter, from $772 million, or $6.17 per share, a year earlier.

Net revenue rose 16 percent to $2.22 billion.

Analysts on average expected earnings of $6.95 per share on revenue of $2.13 billion, according to Thomson Reuters I/B/E/S.

US consumer spending weakens

Visa reported a lower quarterly profit on Wednesday, mainly due to a higher tax provision. The company was also slightly pessimistic about its outlook in the face of soft U.S. consumer spending.

Visa said it expects constant dollar revenue growth of low double digits and a foreign exchange headwind of 2 percentage points over the next year. It said its expectations are slightly lower than they were in June.

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It maintained its forecast for percentage growth per share in 2014 in the mid-to-high teens despite the continued slow pace of global economic recovery, and the growing impact of a strong U.S. dollar.

Visa also authorized a new $5 billion share buyback program and said it believed the Federal Reserve had a strong case in its appeal against a court ruling limiting the fees banks charge retailers for debit card use.

A successful appeal against the court ruling in July would protect an important revenue stream for card companies.

Both Visa and MasterCard face slowing growth in the United States, their largest market.

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U.S. consumer sentiment slid in September to its lowest in five months as consumer lending rates rose and shoppers eyed sluggish economic growth ahead, a survey showed.

Visa said its U.S. domestic payment volume dropped to 8 percent of global volumes in September from 11 percent in August.

Visa and MasterCard have been trying to capture new business in emerging markets where more customers are signing up for cards and digital payments instead of cash.

Net income attributable to Visa fell to $1.19 billion, or $1.85 per Class A share, from $1.66 billion, or $2.47, a year earlier.

Analysts on average, had expected the company to earn $1.85 per share, according to Thomson Reuters I/B/E/S.

Total operating revenue rose 9 percent to $2.97 billion but came in short of analysts' expectation of $3.02 billion due to a strong U.S. dollar.

Visa's results were hit by a $574 million income tax provision, compared with a benefit of $74 million a year earlier. The company gave no reason for the bigger tax bill.

Visa's payment volumes rose 13 percent to $1.1 trillion in the quarter.

Purchase, New York-based MasterCard's shares have risen about 49 percent since the beginning of the year. Visa shares have risen 35 percent. (Click here to get the latest quote)

By Reuters