Mastercard Inc. shares were falling toward their worst day in two years Thursday as investors appeared uneasy with the company’s disclosure of a sequential growth slowdown for the month of October.
Switched transactions growth came in at 15% for the third quarter, Mastercard
MA,
reported Thursday. But the company signaled that trends had decelerated so far in October, with switched volumes up 12% in the first three weeks of the month. Growth slowed in both the U.S. and internationally.
Chief Financial Officer Sachin Mehra told MarketWatch that the relative performance for October didn’t relate to business fundamentals. For one, the company is lapping portfolio wins, which brought new volume onboard but now makes for tougher comparisons.
Additionally, he called out a difference in the timing of Social Security payments in the U.S. Last year, the payment took place in October, but this year it happened in late September, offering a tailwind to September-quarter results but meaning that people had less of that money to spend once October began.
Additionally, investors might be “underappreciating” the impact of the strengthening U.S. dollar, he said. Mastercard previously thought foreign exchange would benefit fourth-quarter results by 3 to 4 percentage points, but now the company expects a tailwind ranging from flat to up a point.
Shares of Mastercard were off 5.9% in afternoon trading and on pace to log their largest one-day percentage drop since Oct. 27, 2021, when they shed 6.1%.
“I’m having hard time explaining the market reaction from my perspective,” Mehra said.
Mastercard, like Visa Inc.
V,
and American Express Co.
AXP,
over the past week, called out healthy consumer spending.
“While macroeconomic and geopolitical uncertainty remains elevated, our diversified business model positions us well to capitalize on the substantial opportunities in payments and services,” Chief Executive Michael Miebach said in a release. He noted “continued resilience in consumer spending” that was seen during the third quarter.
The company logged third-quarter net income of $3.2 billion, or $3.39 a share, up from $2.5 billion, or $2.58 a share, in the year-earlier period. On an adjusted basis, Mastercard also earned $3.39 a share, up from $2.68 a share a year prior, while analysts surveyed by FactSet were modeling $3.21 a share.
Revenue rose to $6.5 billion from $5.8 billion and matched the FactSet consensus.
Mastercard’s gross dollar volume rose 11% on a local-currency basis in the quarter, reaching $2.3 trillion. Mehra noted “steady” spending trends.
The company saw a 21% bump on a local-currency basis in cross-border volume, which occurs when cardholders spend with merchants based in countries other than where their cards were issued. Cross-border volume is typically seen as a proxy for travel spending, although it also includes cross-border e-commerce spending.
“Consumers are still exercising and using discretionary spending toward experiences, which is travel and entertainment,” Mehra said.
Mastercard’s results follow those from Visa and American Express in recent days. Both of those peers sounded upbeat tones on the spending landscape, with Visa’s outlook for its new fiscal year coming in ahead of what some had been fearing going into that report.
See also: Amex calls out ‘strong’ spending and credit trends as earnings beat estimates
Still, shares of smaller financial-technology names sold off sharply Wednesday after Worldline SA
WLN,
a European payments company, delivered a grim warning about deteriorating conditions in Germany.
Mehra said that Mastercard is benefiting from its diversified business model: “Broadly speaking, the consumer, even in Europe, is holding up pretty nicely.”
Read: Block, PayPal and Affirm shares slide after Worldline warning. Are investors overreacting?
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