Mastercard (MA) Q3 Earnings & Revenues Beat, Increase Y/Y

Mastercard Inc. (NYSE:MA) reported third-quarter 2017 earnings per share of $1.34, beating the Zacks Consensus Estimate of $1.23. Also, earnings grew 23% year over year.

Better-than-expected results were primarily due to higher switched transactions, increase in cross-border 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 $3.4 billion exceeded the Zacks Consensus Estimate of $3.29 billion and were up 18% year over year. The upside was primarily driven by a 17% rise in the number of switched transactions to 16.9 billion along with a 15% increase in cross-border volumes. These were partially offset by higher rebates and incentives, mainly due to new and renewed agreements and increased volumes.

About 2.4 billion Mastercard and Maestro branded cards were issued as of Sep 30, 2017.

Mastercard witnessed a year-over-year increase of 19% in total operating expenses to $1.5 billion owing to higher cost components like general and administrative expenses and advertising and marketing costs.

Interest expenses increased a whopping 52% year over year to $35 million.

Operating margin declined 90 basis points year over year to 57.1%.

Mastercard Incorporated Price, Consensus and EPS Surprise

Financial Update

As of Sep 30, 2017, the company’s cash and cash equivalents were $5.56 billion, down 17% from the year-end 2016 level. Long-term debt increased 4.1% to $5.39 billion from the year-end 2016 level.

Share Repurchase and Dividend Payment

During the reported quarter, Mastercard repurchased shares worth $838 million and returned $235 million in dividends.

Our Take

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

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

Rank

Mastercard currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Financial Transaction Service Providers

Among the other financial transaction service providers that have reported third-quarter earnings so far, the bottom line at Capital One Financial Corp. (NYSE:COF) , Discover Financial Services (NYSE:DFS) and American Express Company (NYSE:AXP) beat their respective Zacks Consensus Estimate by 12.6%, 3.9% and 2%.

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