Mastercard (MA) Q3 Earnings Beat Estimates on Volume Growth

Mastercard IncorporatedMA reported adjusted earnings of $1.78 per share, beating the Zacks Consensus Estimate by 5.95%. Earnings improved 33% year over year. Improved revenues drove the earnings upside.

Better-than-expected results were primarily backed by higher switched transactions, increase in cross-border volume and gross dollar volume as well as gains from acquisitions. An increase in rebates and incentives year over year was a partial dampener.

Strong Operational Performance

Mastercard's revenues of $3.9 billion beat the Zacks Consensus Estimate by 0.9%. Revenues were up 17% year over year (on a currency neutral basis).

Mastercard Incorporated Price, Consensus and EPS Surprise

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

Total adjusted operating expenses increased 10% to $1.6 billion, due to higher, general and administrative expenses, advertising and marketing expenses and investment made for growth.

Interest expenses of $48 million increased 37% year over year.

Operating margin expanded 230 basis points to 59.4%.

Gross dollar volume increased 13% while purchase volume was up 15%.

The company's margins gained from a lower tax rate of 16.1% in the third quarter that compares with 26% in the year-ago quarter.

As of Sep 30, 2018, the company's customers had issued 2.5 billion Mastercard and Maestro-branded cards, adjusted for the impact of the Venezuela deconsolidation.

Financial Update

As of Sep 30, 2018, the company's cash and cash equivalents were $6.87 billion, up 15.8% from the level at year-end 2017. Long-term debt was $5.86 billion, up 7.4% from the mark at 2017 end.

Share Repurchase and Dividend Payment

During the reported quarter, Mastercard repurchased shares worth $1.2 billion and returned $260 million in dividends.

Our Take

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

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

Zacks Rank

Mastercard carries a Zacks Rank #3 (Hold).

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 players from the finance sector, American Express Co. AXP , Capital One Financial Corp. COF and Alliance Data Systems Corp. ADS beat earnings by 5.62%, 8% and 2.04%, respectively, in the third quarter.

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Capital One Financial Corporation (COF): Free Stock Analysis Report

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Alliance Data Systems Corporation (ADS): Free Stock Analysis Report

Mastercard Incorporated (MA): 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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