Mastercard Reports Strong Third Quarter Earnings

By Niket Nishant and Vedant Vinayak Vichare

(Reuters) – Payments processor Mastercard (NYSE:MA) reported a better-than-expected profit for the third quarter on Thursday, as customers, encouraged by economic stability, ramped up their spending.

However, the company's shares fell 2% after disclosing that the European Commission has sought documents related to a broader investigation into alleged anti-competitive behavior in the European Union. Mastercard and rival Visa (NYSE:V) are dominant players in the payments industry and have often faced scrutiny and allegations of a duopoly. Mastercard stated it is cooperating with the Commission's request.

Spending Holds Up

Mastercard's results come at the end of a busy earnings week for payments firms, which are being closely examined to assess the health of U.S. consumers. Although some analysts have flagged a slowdown, spending levels remain elevated compared to last year, spurred by wage growth and hopes of a soft landing, which bolster consumer confidence.

Trends indicate that diversified businesses covering cards, mobile payments, peer-to-peer transactions, and value-added services such as fraud protection have been more resilient.

> "Mastercard deserves a higher valuation based on strong expected growth in digital and international markets," said Edward Jones analyst Logan Purk. The company is trading at 31.56 times expected earnings over the next 12 months, compared to Visa's 25.71.

Revenue from Mastercard's payment network jumped 11%, while value-added services increased by 19% compared to last year, accounting for 37% of Mastercard's total revenue.

CEO Michael Miebach stated, "These results reflect healthy consumer spending and ongoing solid demand for our value-added services and solutions." Excluding one-time costs, Mastercard earned $3.89 per share, exceeding expectations of $3.74, according to estimates compiled by LSEG.

Profit rose 2% to $3.3 billion for the three months ended September 30, while revenue grew 13% to $7.4 billion.