Mastercard Inc (NYSE:MA) posted a stronger-than-anticipated 17% jump in 1Q profit due to lower operating expenses and higher purchase volumes recorded in the payments network. However, the company warned that the financial results can stay under pressure due to a strong U.S. currency and weakness in the Brazilian real and the euro. The lower prices of gasoline prevailing in the U.S. are also having an adverse impact on the consumer spending.
Martina Hund-Mejean, the Chief Financial Officer of Mastercard Inc (NYSE:MA), said that the company expects more significant problems from foreign exchange compared to the expectations in January. Mastercard recorded earnings of 89 cents a share, up from 73 cents a share, from the quarter, a year ago. It was better than the analysts’ expectations of 80 cents per share. The revenue jumped 2.7% to $2.23 billion, lower than analysts’ expectations of $2.28 billion in revenue.
The analysts view
John Williams, an analyst said that they think investors will take a backseat that foreign exchange didn’t damage the company’s ability to convert higher top line growth into EPS growth outperformance. The results are announced at a time when U.S. consumers are getting confident about the improving economy. However, the global economic uncertainties can increase with declining oil prices and strengthening U.S. dollar.
The expert view
Ajay Banga, the Chief Executive Officer of Mastercard, said that the fundamentals remain strong but the currency headwinds may pose challenges. The U.S. consumers are using their savings at the gas pump to support saving accounts and pare debt. He added that neither trend can serve good for the company, as it makes money when consumers make purchase on their credit and debit cards. The consumers are positive because they are finding savings in the gas price. The company reported purchase volume growth of 12% in latest quarter.