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Mastercard (MA) Q4 Earnings Beat, Revenues Meet

Zacks Equity Research

Mastercard Incorporated MA reported adjusted earnings of $1.55 per share, beating the Zacks Consensus Estimate by 1.3%. Earnings improved by a good 40% year over year, led by higher revenues.

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

Mastercard Incorporated Price, Consensus and EPS Surprise

Mastercard Incorporated Price, Consensus and EPS Surprise | Mastercard Incorporated Quote

Strong Operational Performance

Mastercard’s revenues of $3.8 billion came in line with the Zacks Consensus Estimate and were up 17% year over year (on a currency neutral basis).

Total adjusted operating expenses rose 14% to $1.8 billion, due to higher, advertising and marketing expenses and provision for litigation. Interest expenses of $47 million increased 14.6% year over year.

Operating margin expanded 140 basis points to 52.3%.

Gross dollar volume increased 14% to $1.5 trillion, while purchase volume was up 15.4% to $1.15 trillion.

The company’s margins gained from a lower tax rate of 18.3% in the fourth quarter that compares with 26.8% in the year-ago quarter.

As of Dec 31, 2018, the company had issued 2.5 billion Mastercard and Maestro-branded cards, adjusted for the impact of the Venezuela deconsolidation.

Financial Update

As of Dec 31, 2018, the company’s cash and cash equivalents were $6.68 billion, up 12.6% year over year. Long-term debt was $5.83 billion, up 7.6% from the mark at 2017 end.

Share Repurchase and Dividend Payment

During the reported quarter, Mastercard repurchased shares worth $888 million and returned $259 million in dividends.

Our Take

Mastecard’s results reflect its strong operating performance, driven by continued efforts to provide superior service to its customers. Its acquisitions, investments in technology, and a number of deals and partnerships signed with clients across the globe are expected to consistently aid its transaction volume growth, thus driving the top line.

Moreover, increasing use of plastic money to replace cash provides ample room for the company to grow. Its strong balance sheet and disciplined capital management strategy are the other positives.

Zacks Rank

Mastercard carries a Zacks Rank #3 (Hold).

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

Total System Services, Inc. TSS is another company in the same space that beat on earnings by 1.9% in the fourth quarter.

Other stocks that are poised to beat on earnings in the October-December quarter include First Data Corp. FDC and Virtu Financial Inc. VIRT.

Data Corp currently carries a Zacks Rank #3 and has an Earnings ESP of +3.17%.

Virtu Financial has a Zacks Rank #2 (Buy) and an Earnings ESP of +23.40%.

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