Mastercard sees healthy spending, expects strong dollar to impact revenue growth

By Emily Bary

Ticket sizes have been pretty stable, CFO says

Mastercard Inc. lowered its GAAP revenue outlook for the full year, but not because it has a more cautious view of the spending landscape.

Rather, the company's new forecast reflects its updated expectations for the strength of the U.S. dollar, which Mastercard (MA) now expects to cause a headwind of between 1 and 2 percentage points.

The payments company now expects a net revenue growth rate at the low end of low-double digits, whereas its prior outlook called for growth at the high end of low-double digits. But on a currency-neutral basis, excluding acquisition impacts, the company anticipates growth at the high end of low-double digits, consistent with its prior outlook.

Shares were down about 2% in toward the end of Wednesday's trading session.

"We continue to see good, solid consumer health and consumer spending trends, and this is true globally," Chief Financial Officer Sachin Mehra told MarketWatch.

From Mastercard's perspective, spending is spending no matter where it takes place, and the company benefits as long as those transactions are still made with its cards.

"So $1 of spend taking place at a restaurant or $1 of spend taking place at a value store generates the same revenue for us," Mehra noted.

Consumers have been showing a preference for experiential spending coming out of the pandemic, and Mastercard continues to see that trend. Ticket sizes there, and generally across Mastercard's portfolio, are pretty stable, according to Mehra.

The company on Wednesday reported first-quarter net income of $3.01 billion, or $3.22 a share, up from $2.36 billion, or $2.47 a share, in the year-earlier period. On an adjusted basis, Mastercard posted earnings per share of $3.31, up from $2.80 a year before, while analysts tracked by FactSet were looking for $3.25.

Revenue rose to $6.35 billion from $5.75 billion - in line with the FactSet consensus.

Gross dollar volume increased 10%, while cross-border volume grew 18%. Mastercard saw a 13% rise in switched transactions.

Mastercard's investor presentation showed a volume slowdown into April. Overall switched volume growth was 9% in the first four weeks of the month, compared with 12% in the first quarter. But Mehra said on the earnings call that growth would have been "relatively stable" were it not for impacts related to the timing of Easter. The holiday fell late in the first quarter this year, instead of in April.

Through April 28, Mastercard also saw 16% growth in cross-border volume, which occurs when transactions are made between customers and merchants based in different countries. That compared with an 18% growth rate on that metric for the first quarter.

"Easter has actually a more pronounced impact in intra-Europe, and that's where you're seeing a more exaggerated number out there," he said on the earnings call.

For the second quarter, Mastercard expects a net revenue growth rate at the high end of high-single digits.

For the latest quarter, Mastercard called out a 16% increase in revenue from value-added services and solutions. The company's release highlighted "continued demand for our consulting and marketing services, loyalty solutions and fraud and security capabilities," though there was some slower relative growth with other solutions.

Mehra explained that data insights, analytics, consulting, marketing and security solutions make up the bulk of Mastercard's services revenue. Other services and solutions, including real-time infrastructure assets, are still growing but not as quickly.

-Emily Bary

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05-01-24 1555ET

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