Source: Seeking Alpha
Mastercard Inc. (NYSE:MA)
Q2 2014 Earnings Conference Call
July 31, 2014 9:00 AM ET
Barbara Gasper – Head, IR
Ajay Banga – President and CEO
Martina Hund-Mejean – CFO
Tien-tsin Huang – JP Morgan
Bryan Keane – Deutsche Bank
David Hochstim – Buckingham Research
Sanjay Sakhrani – KBW
Moshe Orenbuch – Credit Suisse
Jim Schneider – Goldman Sachs
Moshe Katri – Cowen & Co
Darrin Peller – Barclays Capital
Chris Brendler – Stifel Nicolaus
James Friedman – Susquehanna Financial Group
Glenn Greene – Oppenheimer & Co
Bob Napoli – William Blair
Welcome to the MasterCard’s Second Quarter 2014 Earnings Conference Call. My name is Christine, and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.
I will now turn the call over to Barbara Gasper, Head of Investor Relations. You may begin.
Thank you, Christine, and good morning to everyone. Thank you for joining us for a discussion about our second quarter 2014 financial results. With me on the call today are Ajay Banga, our President and Chief Executive Officer; and Martina Hund-Mejean, our Chief Financial Officer.
Following comments from Ajay and Martina, the operator will announce your opportunity to get into the queue for the Q&A session. Up until then, no one is actually registered to ask a question. Even if you think you have already dialed into the queue, you will need to register again following our prepared comments.
This morning’s earnings release and the slide deck that will be referenced on this call can be found in the Investor Relations section of our website at mastercard.com. These documents have also been attached to an 8-K that we filed with the SEC earlier this morning. A replay of this call will be posted on our website for one week through August 7.
Finally, as set forth in more detail in today’s earnings release, I need to remind everyone that today’s call may include some forward-looking statements about MasterCard’s future performance. Actual performance could differ materially from what is suggested by our comments today. Information about the factors that could affect future performance are summarized at the end of our press release, as well as contained in our most recent SEC filings.
With that, I will now turn the call over to Ajay Banga. Ajay?
Thank you, Barbara, and good morning everybody. So for the second quarter, we are very pleased to report a net revenue growth of 13%, both as-reported and adjusted for currency. That increase is driven by healthy volume and transaction growth, which resulted in net income growth of 10% as-reported or 9% adjusted for currency and an EPS growth of 14%. And these results include the impact of all the acquisitions that we’ve completed so far this year.
So let’s start with looking at the underlying global economic trends with the United States where the economy seems to be improving but not without some challenges. Our second quarter SpendingPulse data showed U.S. retail sales, ex-auto, growing at 3.8% and that’s a noticeable improvement over the first quarter number of growth of 2.3%.
However over that quarter, the monthly trend decelerated partially as a result of lower gasoline spending, which consumers did not appear to rollover into additional discretionary spend. Having said that, overall we think that current U.S. economic recovery is very much a work in progress. We see some favorable indicators, the continued improvement in unemployment figures, consumer confidence levels and so on.
But in fact early indications for July retail sales, again ex-auto, are showing further improvement over the second quarter. But there are some factors that could weigh on that economic recovery, like the slowing recovery in housing and the improvement in unemployment coming in part from an upswing in part-time workers rather than just full-time positions.
So despite those mixed segments, our U.S. business saw an improvement in the quarter, primarily driven by stronger growth in our consumer credit volume and continued good growth in commercial credit.
Europe. Europe continues a slow recovery path. PCE growth projections remain unchanged for the year at 3.5%. Consumer confidence, economic sentiment, unemployment rates all continue to improve across the region. And if you add to this in the case of the U.K. in particular, our SpendingPulse data showed retail sales, ex-auto, growing by 4.8% in that quarter, one of the strongest rates in the last four years with growth specs evenly across the sectors.