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Mastercard (MA) Q3 Earnings & Revenues Beat on Volume Growth

Sapna Bagaria

Mastercard Inc. MA reported third-quarter earnings of $2.15 per share, beating the Zacks Consensus Estimate by 7%. Earnings improved 21% year over year.

Better-than-expected results were primarily driven by higher switched transactions, increase in cross-border volume and gross dollar volume, and gains from acquisitions. Increase in rebates and incentives year over year was a partial dampener.

Mastercard Price, Consensus and EPS Surprise

Mastercard Incorporated Price, Consensus and EPS Surprise

Mastercard Incorporated price-consensus-eps-surprise-chart | Mastercard Incorporated Quote

 

Strong Operational Performance

Mastercard’s revenues of $4.5 billion beat the Zacks Consensus Estimate by 1.7% and were up 15% year over year.

Total adjusted operating expenses rose 15% to $1.8 billion, due to the company’s continued investment in strategic initiatives. Interest expenses of $63 million increased 31% year over year.

Adjusted operating margin remained unchanged year over year at 59.4%.
Gross dollar volume increased 14% to $1.7 trillion while cross-border volumes were up 17% on a local-currency basis.

As of Sep 30, 2019, the company’s customers had issued 2.6 billion Mastercard and Maestro-branded cards.

Financial Update

As of Sep 30, 2019, the company’s cash and cash equivalents were $5.1 billion, down 23.6% from year-end 2018 level. Long-term debt was $7.7 billion, up 33% from Dec 31, 2018.

Share Repurchase and Dividend Payout

During the reported quarter, Mastercard repurchased shares worth $1.8 billion and paid out $335 million in dividends.

Our Take

Mastercard is poised to grow, given its solid market position, ongoing expansion and digital initiatives, plus significant opportunities from the secular shift toward electronic payments. Its numerous acquisitions have aided revenue growth.

However, escalating costs will put pressure on the company’s bottom line. In order to gain customers and new business, Mastercard has been incurring high levels of costs under rebates and incentives, which remains a concern. Nevertheless, its strong balance sheet enables business investment, thereby driving growth.

Mastercard carries a Zacks Rank #3 (Hold).

 You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among the companies in the same space that have reported earnings for the quarter ending Sep 30, 2019, Visa Inc. V, American Express Co. AXP and Discover Financial Services DFS, each beat their respective Zacks Consensus Estimate by 2.8%, 0.48% and 3.3%, respectively.

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