) first-quarter 2012 operating earnings per share of $5.36 modestly
surpassed the Zacks Consensus Estimate of $5.30 and also outpaced
the year-ago quarter's earnings of $4.29 per share. Net income for
the reported quarter stood at $682 million, spiking 21.4% from $562
million in the prior-year quarter.
The year-over-year upbeat results were primarily due to better
pricing, an increased number of processed transactions, strong
gross dollar value (GDV) growth and lower tax rate. However,
higher-than-expected acquisition and operating expenses partially
limited the margins' upside.
Total revenue surged 17.1% year over year to $1.76 billion, also
beating the Zacks Consensus Estimate of $1.73 billion. On a
constant currency basis, net revenue increased 19.0% and excluding
the acquisition of Access Prepaid, net revenue grew about 16.0%.
The upside was primarily due to a 29.0% jump in the number of
processed transactions to 7.7 billion along with an 18.0% increase
in cross-border volumes.
During the reported quarter, GDV increased 18.0% to $849
billion, while worldwide purchase volume climbed 17.0% year over
year, on a constant currency basis, to $629 billion. As of March
31, 2012, MasterCard issued 1.8 billion MasterCard-and
Total operating expenses increased 14.0% year over year to $758
million. Currency fluctuations had minimal impact on operating
expenses. The overall increase primarily resulted from a 28.6%
year-over-year upsurge in depreciation and amortization expenses
along with a 17.2% increase in general and administrative expenses.
However, advertising and marketing expenses dipped 3.1% year over
year to $125 million.
Excluding the Access Prepaid acquisition, operating expenses
increased 9% during the reported quarter. Consequently, operating
income escalated 19.6%year over year to $1.0 billion in the
reported quarter. Moreover, operating margin rose to 56.9%,
slightly up from 55.7% in the year-ago quarter.
MasterCard's effective tax rate for the reported quarter was
31.8%, slightly lower than 32.8% in the year-ago period, primarily
attributable to a favourable geographic mix of earnings in
As of March 31, 2012, MasterCard's net operating cash flow grew
20.2% year over year to $427 million. At the end of the reported
quarter, cash and cash equivalents slightly reduced to $3.68
billion from $3.73 billion at 2011-end, while long term-debt
Meanwhile, retained earnings increased to $5.39 billion at the
end of the reported quarter from $4.75 billion at the end of 2011.
Total equity grew to $6.38 billion from $5.88 billion as of
December 31, 2011.
Share Repurchase Update
During the reported quarter, MasterCard repurchased about 0.65
million shares for $248 million. The company bought back about 0.11
million shares for $49 million in 2011. Until April-end, MasterCard
has already bought about an additional 304,600 shares for
approximately $106 million since the fourth quarter of 2011.
On April 12, 2011, MasterCard approved and authorized the
extension of its stock repurchase program to $2 billion from $1
billion. To date, about $556 million of stock remains available
under the current repurchase program authorization.
On February 7, 2012, the board of MasterCard announced a 100%
hike in its dividend to 30 cents per share from the prior 15 cents
per share. The increased dividend will be paid on May 9, 2012 to
shareholders of its Class A common stock and Class B common stock
as of April 9, 2012.
On December 6, 2011, the board of MasterCard announced a
quarterly cash dividend of 15 cents per share, which was paid on
February 9, 2012 to its equity classes of record as on January 9,
MasterCard benefits from strong secular demand growth,
meaningful international exposure, diversified product portfolio,
high barriers, excellent pricing power, risk-free balance sheet and
impressive operating leverage. While the company is steadily
gaining share of the US debit card market, its latest acquisitions
- DataCash and Access Prepaid - have increased operational
efficiencies by about 25% so far.
Also, the above-average earnings growth, strong competitive
position and leverage to an eventual economic recovery will result
in a relative valuation premium.
However, we are concerned about MasterCard's resilience and
ability to raise prices, increased operating expenses, the
detrimental effects of the Consumer Protection Act in the U.S. and
scope for increasing cash flow. Based on these factors, MasterCard
carries a Zacks Rank #2, which implies a near-term Buy rating,
while our long-term recommendation remains Neutral.
Besides, MasterCard's prime peer,
) is slated to report is fiscal second quarter 2012 (ended March
31, 2012) financial results after the closing bell today.
MASTERCARD INC (MA): Free Stock Analysis Report
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