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Mastercard Beats First-Quarter Estimates but Warns of Expenses

Mastercard's biggest headwind 'continues to be cross-border volumes,' one analyst says.
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Mastercard  (MA) - Get Mastercard Incorporated Report beat Wall Street's first-quarter earnings expectations, but the credit card giant warned about increased expenses, while one analyst raised concerns about cross-border volumes.

Shares of the Purchase, N.Y. company at last check were off 1.5% to $389.90.

Mastercard reported first-quarter net income of $1.8 billion, or $1.83 a share, up from $1.7 billion, or $1.68 a share, a year earlier. The latest adjusted earnings came to $1.74 a share, surpassing the FactSet consensus of $1.58 a share.

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Net revenue totaled $4.2 billion, up from $4 billion. Analysts had forecast $4 billion in revenue.

Mastercard said during a conference call that it planned to invest more in data and cybersecurity products and increase spending on advertising and marketing, according to Bloomberg.

Expenses in the second quarter will climb by a percentage in the low 30s, the company said, higher than the 11% increase analysts were expecting.

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In addition, cross-border volume, which tracks spending on cards beyond the country of issue, fell 17%. 

"The biggest headwind for Mastercard continues to be cross-border volumes, which have not improved at the same rate as domestic transactions and carry an outsize level of importance for the networks because of the higher fees collected on these transactions," Brett Horn, a senior equity analyst at Morningstar, wrote in a research note. 

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Horn added that Mastercard "appears to be underperforming Visa  (V) - Get Visa Inc. Report in this respect," though he said the differences appear "largely due to mix, as opposed to any shift in competitive position."

Cowen analyst George Mihalos said the company "continues to believe there is significant opportunity for improvement in cross-border volumes, pointing to improvements in markets where borders are open."

Mihalos, who has an outperform rating on the stock, reiterated his $448 price target and said he remains "bullish on MA’s long-term fundamentals and sustainable top-line growth."

Mastercard said recently that it has partnered with the U.S. crypto exchange Gemini and WeBank to launch a credit card that will give its users rewards in cryptocurrency. 

In January, Mastercard saw its fourth-quarter profit and revenue fall from a year ago but still exceed expectations.