MasterCard Inc. (MA) has retained its position as a leading global electronic payment processor over the past several years through impressive growth policies, brand development and capital management. Notably, its organic growth strategies have led to about high single-digit growth in global card spending on credit and debit cards, for most of 2014.
Other key revenue drivers for card giants like cross-border volumes, gross dollar value (GDV) and payment volume have also witnessed consistent boost across economies. Incremental alliances to tap the rapidly growing digital payments and global market recovery further raise optimism. Additionally, MasterCard strengthened its long-term inorganic growth profile with about seven strategic acquisitions in 2014 without risking the capital.
A reasonable debt on balance sheet and strong liquidity facilitate lucrative shareholder returns and retain market confidence. This is also evident from the 45.5% dividend hike and new share buyback authorization initiated in Dec 2014.
A flexible business model is crucial for MasterCard for countering risks from stiff competition, currency fluctuations, litigations and regulatory challenges, also evident from consensus estimate being marginally south bound. Notably, adherence to the recently amended regulations in Russia and European Union are expected to dampen revenue sources going forward.
Overall, MasterCard’s earnings track record has been quite satisfactory in the trailing four quarters. Better-than-expected results in all quarters of 2014 led to an average earnings surprise of +5.6%.
Currently, MasterCard has a Zacks Rank #3 (Hold), but that could definitely change following its fourth-quarter earnings report that has just been released. The key takeaways from this immediate announcement are highlighted below:
Earnings: MasterCard beat on earnings by a penny. Our consensus called for EPS of 67 cents, and the company reported EPS of 69 cents. Acquisitions had an adverse impact of 3 cents per share.
Revenue: Revenues outperformed our estimate. Our consensus called for revenues of $2.38 billion, and the company reported revenues of $2.42 billion.
Key Stats to Note: Total core operating expenses rose 25.8% year over year to $1.4 billion in the fourth-quarter. Acquisitions contributed 9% to the rise in expenses. Core operating margin deteriorated to 42.1% from 47.7% in the year-ago period.
GDV increased 13% year over year to $1.3 trillion, while cross-border volumes jumped 19%. Number of processed transactions rose 11%.
Long-term debt stood at $1.49 billion at 2014-end against nil debt at 2013-end. Operating cash flow declined to $3.4 billion at 2014-end from $4.2 billion at 2013-end.
The company bought back $155 million shares during the reported quarter, while $3.4 billion worth of shares were repurchased in 2014.
Check back later for our full write up on this MA earnings report later!
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