MasterCard Tops on Q3 Earnings, Costs Up - Analyst Blog

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MasterCard Inc. ( MA ) reported third-quarter 2013 operating earnings per share of $7.27. The results significantly outpaced the Zacks Consensus Estimate of $6.95 and the year-ago quarter figure of $6.17.

Net income for the reported quarter stood at $879 million, up 13.8% from $772 million in the prior-year quarter. No special items were recorded in the comparable quarters.

The better-than-expected results were largely due to the outcome of better pricing, increased number of processed transactions and strong gross dollar value (GDV) growth, partially offset by higher operating and tax expenses. Overall, these factors also led to higher-than-expected margins and operating cash flow.

Net revenues surged 15.6% year over year and 15% on constant currency basis to $2.22 billion, also exceeding the Zacks Consensus Estimate of $2.13 billion. The upside was primarily due to a 16% rise in the number of processed transactions to 10.0 billion along with a 19% increase in cross-border volumes.

During the reported quarter, GDV increased 15% to $1.0 trillion, while worldwide purchase volume rose 14% year over year, on a constant currency basis, to $763 billion. As of Sep 30, 2013, MasterCard had issued 2.0 billion MasterCard-and Maestro-branded cards.

Total operating expenses rose 13.6% year over year to $970 million. The overall increase primarily resulted from a 10.3% year-over-year surge in depreciation and amortization expenses along with a 13.1% uptick in general and administrative expenses. Moreover, advertising and marketing expenses grew 16.5% over the prior-year quarter.

Subsequently, operating income escalated 17.3% year over year to $1.25 billion in the reported quarter. Likewise, core operating margin rose to 56.3% from 55.5% in the year-ago quarter. MasterCard's effective tax rate was 29.9%, higher than 27.6% in the year-ago period.

Financial Update

As of Sep 30, 2013, MasterCard's net operating cash flow significantly augmented 41% year over year to $2.94 billion. At the end of Sep 2013, cash and cash equivalents increased to $3.41 billion from $2.05 billion at 2012-end, while long-term debt remained nil.

Meanwhile, retained earnings increased to $9.63 billion at the end of Sep 2013 from $7.35 billion at 2012-end. Moreover, total equity rose to $7.67 billion from $6.93 billion at Dec 2012.

Share Repurchase Update

During the reported quarter, MasterCard repurchased about 575,000 shares for $345 million. The company has about $912 million of stock available under the latest $2.0 billion share repurchase program, which was authorized in Feb 2013.

Dividend Update

On Sep 17, 2013, the board of MasterCard announced a regular quarterly dividend of 60 cents per share, payable on Nov 8, 2013, to shareholders of record as on Oct 9, 2013.


On Oct 30, MasterCard's prime peer - Visa Inc. ( V ) - reported fiscal fourth-quarter (ended Sep 30, 2013) operating earnings of $1.85 per Class A common share, which came in line with the Zacks Consensus Estimate but outpaced the prior-year quarter figure of $1.54 per share. Double-digit top-line growth along with controlled expenses propelled the improved results.

Along with Visa and MasterCard, Xoom Corp. ( XOOM ) and Fiserv Inc. ( FISV ) also carry a Zacks Rank #2 (Buy).

FISERV INC (FISV): Free Stock Analysis Report

MASTERCARD INC (MA): Free Stock Analysis Report

VISA INC-A (V): Free Stock Analysis Report

XOOM CORP (XOOM): 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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