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MasterCard (MA) Beats on Q4 Earnings as Volume Improves

MasterCard IncorporatedMA reported earnings of 86 cents per share, surpassing the Zacks Consensus Estimate by a penny. Earnings were up 8.9% year over year.

However, markets don't seem to be happy with the MasterCard's quarterly results as it reported lower-than-expected revenues. In the pre-market trading , the company's shares were down more than 3%. The price reaction during the full trading session will provide a better idea about how the investors have accepted the results.

Quarterly results were supported by a slight fall in operating expenses. Further, solid growth in volumes was the tailwind.

Including one time charges related to merchant litigation in the U.K., net income was $933 million, up 4.8% from the prior-year quarter.

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For 2016, earnings of $3.69 per share lagged the Zacks Consensus Estimate of $3.75. However, it was above the prior-year figure of $3.35. Net income was $4.1 billion, up 6.6% from the prior-year quarter. Results included certain onetime special items.

Revenue Growth, Lower Costs Support Results

MasterCard posted revenues of $2.76 billion for the reported quarter, which missed the Zacks Consensus Estimate of $2.78 billion. On a year-over-year basis, revenues increased 9.5%. The upside was primarily driven by a 17% rise in the number of switched transactions to 15.2 billion along with a 13% increase in cross-border volumes. These were partially offset by higher rebates and incentives.

For 2016, revenues of $10.78 billion for the reported quarter missed the Zacks Consensus Estimate of $10.81 billion. On a year-over-year basis, revenues rose 11.5%

During the reported quarter, worldwide purchase volume was $898 billion. As of Dec 31, 2016, 2.3 billion MasterCard and Maestro branded cards were issued.

MasterCard witnessed a year-over-year fall of 1.2% in total operating expenses to $1.39 billion, due to decline in all cost components. The decrease reflects the impact of ongoing cost control efforts.

Operating income was $1.36 billion in the reported quarter, up 23.1% year over year. Interest expenses jumped to $30 million from $12 million in the prior-year quarter.

The company delivered an operating margin of 49.4%.

Strong Balance Sheet

As of Dec 31, 2016, the company's cash and cash equivalents were $6.72 billion up from $5.75 billion at year-end 2015. Long-term debt increased to $5.18 billion from $3.27 billion as of Dec 31, 2015. Total equity increased to $5.66 billion from $6.03 billion at Dec 31, 2015.

Share Repurchase Update

During the reported quarter, MasterCard repurchased around 11 million shares of Class A common stock worth almost $1.1 billion.

Our Take

MasterCard remains well positioned for growth on the back of its solid market position, ongoing expansion and digital initiatives and significant opportunities from the secular shift toward electronic payments. However, escalating costs, a challenging forex environment and legal issues remain concerns.

Mastercard Incorporated Price, Consensus and EPS Surprise

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

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

Performance of Other Card Processing Companies

American Express Company's AXP fourth-quarter 2016 adjusted earnings per share of 91 cents missed the Zacks Consensus Estimate of 98 cents.

Discover Financial Services' DFS fourth-quarter 2016 earnings of $1.40 per share beat the Zacks Consensus Estimate of $1.38 by 1.4%.

Visa Inc. V is slated to announce its results on Feb 2.

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Mastercard Incorporated (MA): Free Stock Analysis Report

Visa Inc. (V): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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