Mastercard returns to profit growth as travel, entertainment spending picks up

By Niket Nishant

(Reuters) -Mastercard on Thursday reported a bigger-than-expected rise in second-quarter earnings helped by strong spending that helped the payments processor return to profit growth after a lukewarm start to the year.

Customers, who had turned somewhat cautious on fears of a recession later this year, resumed spending heavily on travel and entertainment even as the U.S. Federal Reserve continued to raise interest rates that could still tip the economy into a slowdown.

Excluding one-time items, the New York-based company earned $2.7 billion in the three months ended June 30, 10% more than a year earlier. In the first quarter, adjusted profit had dipped nearly 1%.

Mastercard (NYSE:)’s profit of $2.89 per share also beat estimate of $2.82 per share, according to Refinitiv IBES data.

“We see results as constructive and see Mastercard as among the stocks that have the potential to compound well throughout 2023,” Wolfe Research analyst Darrin Peller said.

Mastercard shares have gained nearly 16% so far this year, outperforming rivals Visa (NYSE:) and American Express (NYSE:).

The company’s strong earnings report rounds out a tepid earnings season for card issuers that have come under pressure after being on relatively solid ground compared to other industries, since last year.

On Tuesday, Visa reported its smallest jump in quarterly profit in more than two years. American Express also kept its full-year profit forecast unchanged despite reporting record spending last week.

Mastercard’s gross dollar volumes, a metric that represents the total dollar value of all transactions processed, rose 12% to $2.3 trillion on a local currency basis from a year earlier.

Cross-border volume, a gauge of travel demand that tracks spending on cards outside the country of their issue, jumped 24%.

“Cross-border travel volume showed strong growth again this quarter, reaching 154% of pre-pandemic levels,” Mastercard CEO Michael Miebach said.

Net revenue grew 14% to $6.3 billion.