Visa, Mastercard Enjoy the Holidays as Customer Spending Climbs

(Bloomberg) -- Visa Inc. and Mastercard Inc. are still enjoying some holiday cheer.

The companies posted profit and revenue in the three months ended Dec. 31 that beat analysts’ estimates and boosted their 2018 earnings forecasts. A robust holiday season and increased gas prices spurred customer purchases on the firms’ networks in the quarter, with spending on Visa increasing 10 percent and 13 percent on Mastercard.

“Momentum accelerated in the U.S. driven by strong holiday spending and e-commerce growth,” Visa Chief Executive Officer Al Kelly said in a statement.

Mastercard shares rose 2.3 percent to a record $172.93 in New York, extending this year’s gain to 14 percent. Visa, which reported fiscal first-quarter results after the closing bell, slipped 0.8 percent to $123.62 at 4:53 p.m. in extended trading.

U.S. consumer spending rose at a solid pace in December as shoppers splurged during the holidays. Purchases, which account for about 70 percent of the economy, climbed 0.4 percent after a revised 0.8 percent advance a month earlier, according to Commerce Department figures released Jan. 29. The season’s tally should reach $671 billion, a “stellar” 5.5 percent increase from last year, according to Craig Johnson, head of research firm Customer Growth Partners.

Mastercard took a $981 million charge in the fourth quarter largely tied to changes in U.S. tax laws, but should benefit longer-term from the reduction in the corporate rate. Chief Financial Officer Martina Hund-Mejean said the company expects a rate of 20 percent in 2018.

Forecasts Raised

Mastercard’s growth in adjusted net revenue should be in the “mid-teens" this year, compared with the 12.5 percent analysts in a Bloomberg survey forecast, the Purchase, New York-based firm said in a statement. It also raised its 2016 to 2018 forecast for earnings growth per share from about 20 percent to “mid-20s."

Visa raised its full-year forecast for adjusted EPS growth to the "mid-20s" from the "mid-teens" it previously expected. The firm said its effective tax rate for the year will be about 23 percent, according to a regulatory filing. It also increased its quarterly dividend 7.7 percent to 21 cents a share, and authorized a new $7.5 billion share repurchase program.

So far in 2018, Mastercard is seeing a boost to cross-border volumes -- a measure of spending abroad -- from an unlikely source: cardholders buying cryptocurrencies, Hund-Mejean said on a call with analysts.

Here are some highlights from Mastercard’s and Visa’s quarter:

• Mastercard net income fell 76 percent to $227 million, or 21 cents a share, from a year earlier, while Visa’s rose 22 percent to $2.52 billion, the companies said Thursday in separate statements. Adjusted earnings, which exclude such items as the tax charge, were $1.14 a share for Mastercard, beating the $1.12 average estimate of analysts surveyed by Bloomberg. Visa’s adjusted profit was $1.08 a share, also topping estimates.
• Mastercard’s revenue climbed 18 percent to $3.3 billion from a year earlier, exceeding the $3.25 billion estimate of analysts in the Bloomberg survey, while Visa’s rose 8.9 percent to $4.86 billion. Analysts had expected $4.82 billion.
• Mastercard boosted its revenue guidance for the period 2016 to 2018 to 13 percent to 14 percent.

To contact the reporter on this story: Jenny Surane in New York at jsurane4@bloomberg.net.

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Steven Crabill, Dan Reichl

©2018 Bloomberg L.P.