Yahoo Finance Mastercard (MA) Q1 Earnings Beat on Steady Spending, '24 View Cut
Mastercard Incorporated MA reported strong first-quarter 2024 results on the back of resilient consumer spending and solid cross-border volumes. Despite higher-than-average inflation and a high-interest rate environment, higher card spending by U.S. consumers continues to support MA’s results. An expanding payment network and value-added services and solutions also contributed to the quarterly results.
However, the upside was partly offset by an increase in operating expenses. Also, investors might worry about its revenue guidance cut. Furthermore, the recent appreciation of the U.S. dollar is expected to pose a challenge for foreign exchange, turning it into a headwind.
MA reported first-quarter 2024 adjusted earnings of $3.31 per share, which outpaced the Zacks Consensus Estimate by 2.8%. The bottom line climbed 18% year over year.
Net revenues of the leading technology company in the global payments industry amounted to $6.3 billion, which improved 10% year over year in the quarter under review. The top line beat the consensus mark by 0.4%.
Mastercard Incorporated Price, Consensus and EPS Surprise
Mastercard Incorporated price-consensus-eps-surprise-chart | Mastercard Incorporated Quote
Q1 Operational Performance
Gross dollar volume (representing the aggregated dollar amount of purchases made and cash disbursements obtained from Mastercard-branded cards) rose 10% on a local-currency basis to $2.3 trillion in the first quarter. The figure missed the Zacks Consensus Estimate by 2.5%.
Cross-border volumes (a key measure that tracks spending on cards beyond the issuing country) advanced 18% on a local currency basis. Switched transactions, which indicate the number of times a company’s products have been used to facilitate transactions, were 36.7 billion in the quarter under review. The figure grew 13% year over year and beat the consensus mark by 2.2% and our estimate by 3.8%.
Value-added services and solutions net revenues of $2.4 billion improved 16% year over year and came higher than our model estimate of $2.3 billion. The growth can be attributed to the continued demand for its consulting and marketing services, loyalty solutions, as well as fraud and security capabilities.
Payment network rebates and incentives escalated 20% year over year in the first quarter as an impact of new and renewed deals.
Mastercard’s clients issued 3.4 billion Mastercard and Maestro-branded cards as of Mar 31, 2024.
Adjusted operating expenses of $2.6 billion increased 9% year over year due to elevated general and administrative expenses and met our estimate.
This Zacks Rank #3 (Hold) company’s operating income advanced 15% year over year to $3.6 billion but fell short of our estimate of $3.7 billion. Operating margin of 56.8% improved 220 basis points year over year in the quarter under review.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Financial Position (as of Mar 31, 2024)
Mastercard exited the first quarter with cash and cash equivalents of $7.3 billion, which increased from the 2023-end level of $8.6 million. The figure is way higher than the short-term debt ($2.1 billion).
Total assets of $42.6 billion grew from the $42.4 billion figure at 2023 end.
Long-term debt amounted to $13.5 billion, down from the $14.3 billion figure as of Mar 31, 2023.
Total equity of $7.3 billion improved from the 2023-end level of $7 billion.
Mastercard generated cash flows from operations of $1.7 billion in the first quarter, which declined from the year-ago level of $1.9 billion.
Capital Deployment Update
Mastercard bought back 4.4 million shares for $2 billion in the first quarter. It had a leftover buyback capacity of $11.3 billion as of Apr 26, 2024. It bought back another 1.7 million shares for $815 million in the quarter-to-date period through Apr 26. Mastercard paid out dividends worth $616 million in the quarter under review.
2Q24 Guidance
Management projects net revenues to register high-end of high-single-digit growth on a year-over-year basis in the second quarter of 2024, while adjusted operating expenses are anticipated to record a high-end of high-single-digit growth as well.
2024 View
Management now expects net revenue growth to witness the low-end of low-double-digit growth from the 2023 reported figure of $25.1 billion. Earlier, it expected high-end of low-double-digit growth. Adjusted operating expenses are estimated to increase in low-end of low-double-digit from the 2023 figure of $10.6 billion.
How Did Other Financial Stocks Fare?
Here are some companies from the broader Business Services space that have already reported earnings this season.
Visa Inc. V reported strong second-quarter fiscal 2024 results, which benefited from expanding payments volume, cross-border volume and processed transactions. Its earnings per share of $2.51 outpaced the Zacks Consensus Estimate of $2.43 by 3.3%. The bottom line rose 20% year over year.
Despite challenges, such as a high interest rate environment, more than average inflation level and concerns about the economic slowdown, resilient consumer spending and strong e-commerce trends supported Visa's performance.
The Western Union Company WU posted robust first-quarter 2024 results, driven by the Branded Digital business' resilience, growth in transactions, solid Consumer Money Transfer business performance and stabilization of the retail business. However, increased expenses tempered some of the gains.
It announced first-quarter 2024 adjusted earnings per share of 45 cents, which beat the Zacks Consensus Estimate by 12.5%. Western Union’s bottom line rose nearly 5% year over year.
FirstCash Holdings, Inc. FCFS reported adjusted earnings of $1.55 per share, beating the consensus mark by 3.3%. Over the last four quarters, it beat earnings estimates each time, with an average surprise of 8.1%.
FirstCash posted revenues of $836.4 million in the reported quarter, while the total profit level reached $61.4 million. The Zacks Consensus Estimate for earnings for the next quarter suggests 2.6% year-over-year growth.
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