By Emily Bary
Mastercard Inc. delivered earnings and revenue ahead of expectations Thursday, as the financial-services company benefited from a continued rebound in consumer spending.
Mastercard’s /zigman2/quotes/207581792/composite MA +3.60% fourth-quarter net income rose to $2.38 billion, or $2.41 a share, from $1.79 billion, or $1.78 a share, in the year-prior quarter. On an adjusted basis, the company earned $2.35 a share, up from $1.64 a share a year prior. The FactSet consensus was for $2.21 in adjusted earnings per share.
The payments giant reported revenue of $5.22 billion, up from $4.12 billion a year earlier, while analysts tracked by FactSet were modeling $5.17 billion.
Mastercard noted that card-present transactions, which mainly relate to in-person spending, saw improving growth in the quarter, while card-not-present transactions, which mainly consist of online spending, continued to show strength.
Formerly offline-focused merchants that adopted “omnichannel” strategies during the pandemic haven’t abandoned online business as in-person commerce resumes, Mastercard Chief Financial Officer Sachin Mehra told MarketWatch. The company is also seeing “larger propensity to use contactless transactions” as more people have growth accustomed to using tap payments for small-ticket purchases.
Mastercard saw gross dollar volume increase 23% on a local-currency basis relative to a year earlier, while cross-border volume rose 53%. The company disclosed that cross-border spending was back above pre-pandemic levels during the quarter.
The company noted in its earnings presentation that cross-border volume was up 47% from year-prior levels during the first three weeks of January.
Mehra said on Mastercard’s earnings call that the COVID-19 omicron wave has had a “minimal” impact on the company’s overall switched volumes. While the company has seen a bit of moderation in cross-border spending, Mastercard executives expect the impact of omicron to be short-lived and predict that cross-border travel will be back at pre-pandemic levels by yearend.
Mastercard saw pent-up demand for travel in 2020 and 2021, “and it continues,” Chief Executive Michael Miebach said on the call. “People will want to travel and get out whenever they can, and it has been proven again and again.”
Cross-border travel is a “key accelerant of our revenues” as it not only brings spending, but also affords Mastercard opportunities to sell various services to its customers, Mehra told MarketWatch. Already, the relaxation of travel restrictions has manifested positively in Mastercard’s results, he said.
Mehra also noted that Mastercard has “invested heavily” to position itself for the recovery in cross-border activity by nabbing co-brand card wins in the airline space and partnering with online-travel aggregators that can use the company’s virtual-card technologies.
While Asia generally has been slower than other regions to relax pandemic-related restrictions on travel, Mehra sees opportunity ahead.
“The good news is it provides that much more of a potential tailwind when things open up there,” he said.
Bernstein analyst Harshita Rawat also saw potential for momentum coming from Asia. “We believe that if Asia travel restrictions ease in 2022, then cross-border travel will likely comfortably be above 2019 levels by the end of 2022,” she wrote in a note to clients.
For the first quarter and the full year, Mastercard expects net revenue growth in the “high-teens” percentage range. When excluding acquisitions and currency impacts, the company anticipates revenue growth at the “high-end of high-teens” in the quarter and the full year.
Mizuho analyst Dan Dolev called Mastercard’s revenue outlook “somewhat disappointing.” The FactSet consensus was for upwards of 19% in net revenue growth.
Mastercard is also calling for “low-teens” growth in net operating expenses for the first quarter and low-double-digit growth for the full year.
Shares were up 2.4% in afternoon trading Thursday.
The report comes after fellow financial-services company American Express Co. /zigman2/quotes/203805826/composite AXP +3.58% delivered upbeat results earlier in the week and upped its long-term growth goals . Amex cited what it expects to be lasting behavioral changes coming out of the pandemic as consumers continue to show strong online spending patterns even as offline shopping has recovered.
Peer Visa Inc. /zigman2/quotes/203660239/composite V +2.71% is due to report fiscal first-quarter results after Thursday’s closing bell.
Mastercard shares have risen 5.2% over the past three months as the S&P 500 /zigman2/quotes/210599714/realtime SPX +2.39% has decreased 4.9%.