Mastercard (MA) Q3 Earnings Top on Strong Cross-Border Volumes
Mastercard Incorporated MA reported third-quarter 2023 adjusted earnings of $3.39 per share, which beat the Zacks Consensus Estimate by 5.6%. The bottom line improved 26% year over year.
The leading technology company in the global payments industry reported net revenues of $6,533 million, which rose 14% year over year in the quarter under review. The top line outpaced the consensus mark by a whisker.
The quarterly results were aided by strong consumer spending and solid growth in travel and non-travel cross-border spending. The rise in switched transactions also contributed to the quarterly results. However, the upside was partly offset by elevated operating expenses.
Mastercard Incorporated Price, Consensus and EPS Surprise
Mastercard Incorporated price-consensus-eps-surprise-chart | Mastercard Incorporated Quote
Q3 Operational Performance
Gross dollar volume (representing the aggregated dollar amount of purchases made and cash disbursements obtained from Mastercard-branded cards) advanced 11% on a local-currency basis to $2.3 trillion in the third quarter.
Cross-border volumes (a key measure that tracks spending on cards beyond the issuing country) improved 21% on a local-currency basis. Switched transactions, which indicate the number of times a company’s products have been used to facilitate transactions, were 37,155 million, higher than the consensus mark of 37,133 million. The figure grew 15% year over year in the quarter under review.
Value-added services and solutions net revenues rose 17% year over year to $2,323 million, higher than our estimate of $2,280.5 million. The growth came on the back of strength in cyber and intelligence solutions, coupled with sustained demand for consulting and marketing services, as well as loyalty solutions.
Payment network rebates and incentives escalated 22% year over year in the third quarter. Our estimate indicated the metric to increase 19.7% year over year.
MA’s clients issued 3.3 billion Mastercard and Maestro-branded cards as of Sep 30, 2023.
Operating expenses of $2,689 million increased 2% year over year due to higher general and administrative expenses. However, the figure came lower than our estimate of $2,720.2 million.
Mastercard generated an operating income of $3,844 million in the quarter under review, which rose 24% year over year and beat our estimate of $3,789.4 million. The operating margin of 58.8% improved 480 basis points year over year.
Balance Sheet (as of Sep 30, 2023)
Mastercard exited the third quarter with cash and cash equivalents of $6,890 million, which declined 1.7% from the 2022-end level. The figure is way higher than the current portion of long-term debt ($1,337 million).
Total assets of $39.7 billion increased 2.5% from the figure at 2022 end.
Long-term debt amounted to $14.2 billion, up 3.5% from the figure as of Dec 31, 2022. Total equity of $6,360 million inched up 0.1% from the 2022-end level.
Cash Flows
Mastercard generated cash flows from operations of $7,850 million in the first nine months of 2023, which fell 3% from the prior-year comparable period.
Capital Deployment Update
Mastercard bought back 4.8 million shares for $1.9 billion in the third quarter. It had a leftover buyback capacity of $4.5 billion as of Oct 23, 2023. MA paid out dividends worth $538 million in the quarter under review.
4Q23 Guidance
Management projects net revenues to register low-double-digit growth on a year-over-year basis in the fourth quarter of 2023 while operating expenses are anticipated to witness the high-end of high-single-digit growth.
2023 View
Management earlier anticipated net revenue growth to be in the low-teens range from the 2022 reported figure. Operating expenses were forecasted to register high-single-digit growth on a year-over-year basis in 2023.
Zacks Rank
Mastercard currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Business Services Sector Releases
Of the other Business Services sector industry players that have reported third-quarter results so far, the bottom-line results of Robert Half Inc. RHI, Waste Management, Inc. WM and Fiserv, Inc. FI beat the respective Zacks Consensus Estimate.
Robert Half reported third-quarter 2023 earnings of 90 cents per share, which beat the Zacks Consensus Estimate by 12.5% but declined 41.2% year over year. Revenues of $1.56 billion beat the consensus mark by 1.9% but decreased 14.7% year over year. Talent Solutions’ revenues of $1.1 billion decreased 17% year over year on an as-adjusted basis. U.S. Talent Solutions’ revenues of $823 million were down 20% year over year. The adjusted gross profit of RHI in the quarter was $640.9 million, down 18.6% year over year. The adjusted gross profit margin of 40.8% declined 200 basis points year over year.
Waste Management’s third-quarter 2023 adjusted earnings per share of $1.63 surpassed the Zacks Consensus Estimate by 1.2% and improved 4.5% year over year. Total revenues of $5.2 billion missed the consensus estimate by 1.2% but increased 2.4% year over year. The Collection segment recorded revenues of $3.51 billion, up 4.8% from the prior-year quarter’s figure. The Landfill segment’s top line grew 5% year over year to $1.26 billion. Adjusted operating EBITDA of $1.54 billion increased 3.5% from the year-ago quarter’s level. Adjusted operating EBITDA margin of WM increased 100 basis points to 29.6% from the prior-year quarter.
Fiserv reported third-quarter 2023 adjusted earnings per share (excluding 40 cents from non-recurring items) of $1.96, which exceeded the Zacks Consensus Estimate by 1% and increased 20% year over year. Adjusted revenues of $4.62 billion surpassed the consensus estimate by 0.53% and rose 8.2% year over year. Organic revenue growth was 12% in the quarter, driven by 20% and 6% growth in the Acceptance and Payments segments, respectively. Revenues in the Product segment of FI were $865 million, up 3% year over year but missed our estimated $901.6 million. Revenues from Merchant Acceptance were $2.11 billion, up 12.2% from the year-ago figure. The operating margin from the Merchant acceptance segment was 35.9%, up from the year-ago figure of 32.4%.
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