MasterCard Inc (MA.N), the world's second-largest payment network, reported a higher-than-expected rise in quarterly profit, but the company's revenue missed analysts' estimates as a sluggish global economy weighs on consumer spending.
MasterCard shares were down 2.6 percent at $538.54 on Wednesday afternoon. They had previously risen about 6 percent this year.
"In the U.S., the second quarter right now looks a little bit dodgy, but there could be some upside going into the second half of 2013 as far as U.S. economic growth is concerned," Chief Executive Ajay Banga said on a post-earnings conference call.
Consumer sentiment across the globe has remained muted, given the uncertainty in Europe and China's slowing growth. Consumer spending has also taken a hit from higher payroll taxes and a delay in tax refunds.
MasterCard customers made $690 billion of purchases worldwide on a local currency basis, up 10 percent from a year earlier, but down 5 percent from the fourth quarter of 2012.
"Looking ahead, recent positive news about the strengthening of U.S. housing market -- could be a good signal that the economy is turning. But we are going to watch, and the second half of 2013 will be the test of that," Banga said.
MasterCard maintained its forecast of 20 percent compounded annual growth in earnings per share between 2013 and 2015.
MOBILE PAYMENT GROWS
Both MasterCard and its larger rival, Visa Inc (V.N), are trying to capture new business as consumers turn increasingly to cards and digital payments instead of cash.
They are also experimenting with mobile payments as they fear losing business to upstart technology companies.
MasterCard plans to charge a fee for digital wallet operators such as PayPal, starting in June. Visa's CEO had said that the company may follow suit.
Digital wallets are electronic versions of real wallets that store card and bank information and can be used to buy things online quickly and anonymously. They are increasingly being used on smartphones to shop in retail stores, posing a threat to networks such as MasterCard, Visa and American Express (AXP.N).
MasterCard signed a memorandum of understanding with Alibaba Group, Asia's largest e-commerce company, to offer epayment services to potentially 800 million Alibaba customers.
The company is also looking to boost its presence outside the United States, tapping higher-growth markets in Asia, Africa and the Middle East, where cash transactions dominate.
Purchase volumes in Asia-Pacific, the Middle East and Africa grew 19.1 percent.
During the quarter, MasterCard signed agreements with Qantas Airways (QAN.AX), South Africa's NedBank (NEDJ.J), and Japan's Rakuten Inc 4755.OS to offer e-commerce payment options.
Visa reports results later in the day. (link.reuters.com/xep77t)
BOOST IN PROFITS
Net income rose to $766 million, or $6.23 per share, in the first quarter, from $682 million, or $5.36 per share, a year earlier.
Analysts on average were expecting the company to earn $6.18 per share, according to Thomson Reuters I/B/E/S.
Revenue rose 8.4 percent to $1.91 billion but fell short of the average analyst estimate of $1.93 billion.
Growth in purchase volumes in the United States, the company's biggest market, eased to 4.6 percent from 13.2 percent a year earlier.
(Reporting by Tanya Agrawal in Bangalore; Editing by Supriya Kurane)