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Mastercard's (MA) Q1 Earnings Top as Domestic Spending Returns

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World’s leading payment network company Mastercard Inc.’s MA first-quarter 2021 earnings of $1.74 per share beat the Zacks Consensus Estimate by 12.3%. However, the same declined 4.9% year over year. The earnings outperformance is led by an increase in domestic spending, partly offset by weak cross-border volumes.

Mastercard’s revenues of $4.2 billion surpassed the Zacks Consensus Estimate by 5.8% and were also up 2% on a currency-neutral basis. However, the top line suffered, primarily from soft cross-border volumes and growth in rebates and incentives.

Total adjusted operating expenses increased 7% year over year to $2 billion due to a rise in general and administrative expenses.

Mastercard Incorporated Price, Consensus and EPS Surprise

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

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

Other revenues grew 27% year over year. This also includes a 3% increase on acquisitions. Remaining growth was driven, primarily by the company’s Cyber & Intelligence and Data & Services solutions.
Adjusted operating margin of 52.9% was down 180 basis points year over year.

Gross dollar volume was up 8% to $1.7 trillion while cross-border volumes plunged 17% on a local-currency basis.

Switched transactions, which indicate the number of times a company’s products were used to facilitate transactions, were up 9% year over year.

As of Mar 31, 2021, the company’s customers issued 2.8 billion Mastercard and Maestro-branded cards.

Share Repurchase and Dividend Payout

During the quarter, Mastercard bought back 3.9 million shares at a cost of $1.4 billion and paid out $439 million as dividends.

The company generated cash from operating activities of $1.46 billion, down 21.3% year over year.

Balance Sheet Position (as of Mar 31, 2021)

The company’s long-term debt was $13.22 billion, up 9.9% from the level as of Dec 31, 2020. Also, cash and cash equivalents of $7.25 billion declined 28.4% from the level as of Dec 31, 2020.

Our Take

Mastercard with a market capitalization of $393 billion is poised for strong growth owing to a rapid shift from cash to the digital modes of payment, which are mostly preferred by the next-gen consumers. Also, the coronavirus episode prompted the older generation to adopt the digital method, given that this is so very flexible, easy and secure. Thus, the transition to digital seems almost permanent, even in the post pandemic world.

Mastercard executed several acquisitions, which helped it expand the addressable markets, drive new revenue streams and strengthen its core product solutions. Investment in technology keeps Mastercard at the forefront of the rapidly-evolving payments industry.

The company is well-poised to gain from consistent cash generating abilities from operations on the back of growing business volumes. Its strong capital position boosts investment in business and shareholder value via share buybacks and dividend payouts.

Other stocks in the same space including American Express Co. AXP and Discover Financial Services DFS and Visa Inc.’s V bottom line beat earnings estimates by 3.57%, 75% and 9.52%, respectively.

Zacks Rank

Mastercard carries a Zacks Rank #3 (Hold), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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American Express Company (AXP) : Free Stock Analysis Report

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