By Emily Bary
Mastercard Inc.’s latest results indicated strong consumer spending that analysts think will continue even as the coronavirus outbreak unfolds.
The company easily topped profit expectations with its Wednesday morning report while delivering in-line revenue. Mastercard /zigman2/quotes/207581792/composite MA -0.02% said it saw gross-dollar volume tick up 12% and cross-border volume grow 16% on a local-currency basis.
Shares were up 0.5% in midday trading.
“On the macroeconomic environment, consumer spending remains relatively healthy, and we expect this to continue in 2020,” Chief Executive Ajay Banga said on the company’s earnings call. However, the company is “monitoring a number of economic and geopolitical factors as well as the potential effects of coronavirus that could impact” its results.
Chief Financial Officer Sachin Mehra continued that it’s still early to have much visibility into impacts from the virus, which has prompted some businesses to close stores in China and caused a handful of airlines to reconsider flights in and out of the country. Mastercard has a “natural hedge,” Mehra said, because “a decent portion of our inbound and outbound cross-border from China is e-commerce related.”
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The results and commentary were encouraging for Keefe, Bruyette & Woods analyst Sanjay Sakhrani, who pointed to strength in Mastercard’s volume and transaction growth. “Obviously what happens with the coronavirus bears monitoring, but we’re comforted by the fact that much of the volume for Mastercard in China is related to [e-commerce],” he wrote.
Geographic highlights for the company include the U.S., Europe, and Asia Pacific, all of which are showing “stable to modest growth,” in his view. “The outlook is more mixed in Latin America” as Mastercard is experiencing challenging conditions in Argentina and Mexico.
Sakhrani rates Mastercard’s stock at outperform with a $383 target price.
Leaving aside the coronavirus, Mastercard executives also talked about China in regards to the recent Phase 1 trade agreement, which some think could open the door for U.S. credit-card giants to play more of a direct role in China. “We’re pleased with the recent trade deal with China and obviously will continue our efforts to pursue a license to participate in that market domestically,” Banga said.
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The totality of Mastercard’s commentary on China struck Bernstein analyst Harshita Rawat as a “wait-and-see approach” but she highlighted that the company saw strong overall cross-border trends during the quarter even as some had been concerns about China ahead of the report. She has an outperform rating and $355 target price on Mastercard’s stock.
Barclays analyst Ramsey El-Assal cheered a “nice slate of renewals and wins,” including a deal with China Construction Bank and an arrangement with Bank of America Corp. /zigman2/quotes/200894270/composite BAC +5.88% around business-to-consumer disbursements.
Still, “given the stock’s recent run and commentary on higher expected reported [operating-expense] growth due to M&A, we are not surprised by a largely neutral reaction to healthy Q4 results in today’s tape,” he wrote. El-Assal rates Mastercard cards at overweight with a $370 target.
Mastercard’s results kick off a busy stretch for payments earnings, with PayPal Holdings Inc.’s /zigman2/quotes/208054269/composite PYPL +0.83% results due out after Wednesday’s closing bell and Visa Inc.’s /zigman2/quotes/203660239/composite V -0.32% numbers scheduled for a Thursday afternoon release.
Shares of Mastercard have climbed 18% over the past three months, outpacing gains for Visa and PayPal. The S&P 500 /zigman2/quotes/210599714/realtime SPX +1.63% has increased 8% in that span.