Mastercard (MA, Financial) reported better-than-expected profits for the third quarter, driven by increased consumer spending encouraged by economic stability. This report concludes a busy earnings week for the payments industry, which analysts are watching closely to assess the health of U.S. consumers. Although some companies hinted at a slowdown, spending remains robust year-over-year, bolstered by wage growth and optimism for a soft landing in the economy.
For the three months ending September 30, Mastercard's profit rose 2% to $3.3 billion, while revenue surged 13% to $7.4 billion. Excluding one-time costs, earnings per share were $3.89, surpassing market expectations of $3.74. Current trends indicate a resilient diversified business model that includes credit cards, mobile payments, P2P transactions, and fraud protection services.
Revenue from Mastercard's payment network increased by 11%, while value-added services and solutions grew 19% year-over-year, accounting for 37% of total revenue. CEO Michael Miebach attributed the results to healthy consumer spending and strong demand for their value-added services and solutions. Spending remained stable in October, with cross-border transaction volume, which measures travel demand, increasing 18% year-over-year. Additionally, switched transactions (the value of transactions processed by the Mastercard network) grew by 11%.
In August, Mastercard announced a global workforce reduction of 3% as part of a restructuring plan focused on growth areas, incurring a $190 million pre-tax cost related to this initiative. In June, a federal judge dismissed a $30 billion settlement between Mastercard, Visa (V), and U.S. merchants, ending an attempt to resolve a long-standing lawsuit over credit card swipe fees. During the third quarter, Mastercard reserved $176 million for litigation.
Before the U.S. stock market opened on Thursday, Mastercard shares rose nearly 2%. Year to date, the stock has gained 20%, outperforming competitor Visa but lagging behind the benchmark S&P 500 index.
