MasterCard, the second-biggest U.S. payments network, reported profit that beat analysts' estimates as spending on credit and debit cards rose.
Second-quarter net income increased 21% to $848 million, or $6.96 a share, from $700 million, or $5.55, a year earlier, the Purchase, New York-based firm said today in a statement. The average estimate of 33 analysts surveyed by Bloomberg was for earnings of $6.29 a share.
Chief Executive Officer Ajay Banga is repurchasing shares and boosting MasterCard's dividend as consumers shift from cash to electronic payments. The company is targeting emerging markets for growth to counter sluggish spending in Europe and the U.S.
"We continue to execute on our global strategy and navigate through what we all know is a somewhat uncertain economic environment," Banga, 53, said on a conference call with analysts.
MasterCard rose 2.7% to $614.74 at 11:24 a.m. in New York, the fourth-best performer on the Standard & Poor's 500 Information Technology Index. The shares have advanced 25% this year, outpacing the 10% gain of the 70-company index.
Visa, the biggest payments network, has climbed 23% since Dec. 31. The Foster City, California-based company last week posted a profit for the three months ended June 30 of $1.23 billion, or $1.88 a share. Discover Financial Services reported net income for the same period of $602 million, or $1.20 a share. Discover, operator of the fourth-biggest U.S. bank-card network, has gained 29% this year.
MasterCard's revenue increased 15% to $2.1 billion in the quarter, compared with a $2 billion average estimate iin a survey of analysts by Bloomberg. Tien-tsin Huang, an analyst with JPMorgan Chase & Co., and Moshe Orenbuch at Credit Suisse Group AG both predicted about $1.98 billion.
Worldwide spending on MasterCard- and Maestro-branded cards climbed 12% to $734 billion, the company said. Processed transactions jumped 11% to 9.5 billion, according to the statement.
Operating expenses increased 2.6% to $868 million from a year earlier, the company said. Huang had estimated $875 million while Orenbuch had predicted $874 million.
Chief Financial Officer Martina Hund-Mejean said revenue should increase at a compound annual rate of 11% to 14% between this year and 2015 and that earnings per share will climb by at least 20% in that period.
Spending on cards in the U.S. increased 6.7% to $263 billion in the quarter amid "some stabilization in the employment levels," Banga told analysts. Payrolls rose by 195,000 workers in June for the second month in a row, exceeding the estimate projected by economists in a Bloomberg survey and indicating the U.S. economy is poised for faster growth.
"Our own U.S. business reflected these improving trends," Banga said.
In Europe, spending by card customers increased 11% to $206 billion, the firm said. MasterCard won a card-issuing deal in the quarter with Danske Bank A/S, the biggest Danish lender. Banga said on the call that he expects 50% growth in the Baltic and Nordic countries over the next five years.
"Outside of the U.K., many Europeans are still heavily reliant on cash," Hund-Mejean said in a telephone interview. "And No. 2 is we're winning market share. Those are the two drivers for us in Europe."
While spending in Latin America climbed 20% to $49 billion in the quarter, Banga said he was watching the Mexican and Brazilian economies "very carefully." In Brazil, MasterCard's second-biggest market after the U.S., economists have cut their economic growth forecasts for this year and next as inflation weakens consumption.
"That's really concerning," Hund-Mejean said. "The Brazilian government were hoping that they'd be getting back to a more normalized growth rate of 4% to 5% and they're a far cry from that."
Card spending by customers in Asia-Pacific, the Middle East and Africa jumped 19% to $184 billion, the firm said. MasterCard will continue to target emerging markets for growth, even amid slowdowns across developing economies, Hund-Mejean said.
"It will help countries in the emerging-market arena if they could lessen their dependence on cash economy and really go to electronic forms of payment," Hund-Mejean said.