It has been about a month since the last earnings report for MasterCard (MA). Shares have added about 1.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is MasterCard due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Mastercard's Q1 Earnings Beat on Transaction Growth
Mastercard Incorporated reported adjusted earnings of $1.78 per share, beating the Zacks Consensus Estimate of $1.66. Earnings improved 18.7% year over year. Improved revenues drove the earnings upside.
Better-than-expected results were primarily backed by higher switched transactions, increase in cross-borader volume and gross dollar volume, and gains from acquisitions. An increase in rebates and incentives year over year was a partial dampener.
Strong Operational Performance
Mastercard’s revenues of $3.89 billion surpassed the Zacks Consensus Estimate by 0.6%. The same was up 8.6% year over year.
Total adjusted operating expenses rose 2% to $1.7 billion, due to company’s continued investments in strategic initiatives. Interest expenses of $46 million increased 7% year over year.
Operating margin expanded 270 basis points to 56.9%.
Gross dollar volume increased 12% to $1.5 trillion while cross-border volumes were up 13% on a local-currency basis.
The company’s margins gained from a lower tax rate of 15.5% in the first quarter compared with 17.3% in the year-ago quarter.
As of Mar 31, 2019, the company’s customers had issued 2.5 billion Mastercard and Maestro-branded cards.
As of Mar 31, 2019, the company’s cash and cash equivalents were $5.86 billion, down 12.3% year over year. Long-term debt was $5.8 billion, almost unchanged relative to Dec 31, 2018 levels.
Share Repurchase and Dividend Payment
During the reported quarter, Mastercard repurchased shares worth $1.8 billion and returned $340 million in dividends.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, MasterCard has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, MasterCard has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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