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MasterCard (MA) Up 9.1% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for MasterCard (MA - Free Report) . Shares have added about 9.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is MasterCard due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Mastercard's Q4 Earnings and Revenues Beat, Decline Y/Y

Mastercard’s fourth-quarter 2020 earnings of $1.64 per share beat the Zacks Consensus Estimate by 8.6%. However, the bottom line was down 16% year over year due to  weak cross-border business.
Rebates and incentives were flat but inched up 1% on a currency-neutral basis.

Mastercard’s revenues of $4.1 billion surpassed the Zacks Consensus Estimate by 2.7%. However, the top line fell 7% on a currency-neutral basis. Revenues were affected primarily by a decline in cross-border volumes.

Total adjusted operating expenses remained unchanged year over year at $2 billion owing to a dip in advertising and marketing, which was offset by a rise in general and administrative expenses.

Other revenues grew 16%  or  17%  on  a  currency-neutral  basis.  This  also includes  a  1% increase in acquisitions. Remaining growth was driven, primarily by the company’s Cyber & Intelligence and Data & Services solutions.
Adjusted operating margin of 51% contracted 330 basis points year over year

Gross dollar volume was up 1% to $1.7 trillion while cross-border volumes plunged 29% on a local-currency basis.

Switched transactions, which indicate the number of times a company’s products were used to facilitate transactions, were up 4% year over year.

As of Dec 31, 2020, the company’s customers issued 2.8 billion Mastercard and Maestro-branded cards.

Share Repurchase and Dividend Payout

During the quarter, Mastercard bought back 3.1 million shares at a cost of $1 billion and paid out $399 million in dividends.

Balance Sheet Position (as of Dec 31, 2020)

The company’s long-term debt was $12 billion, up 41% from the level as of Dec 31, 2019 because a $4-billion long-term debt was issued in March.  However, cash and cash equivalents of $10.11 billion soared 44.7% from the level as of Dec 31, 2019.

Business Update

In the quarter, the company closed its buyout of Finicity for $825 million. The acquired entity is a leading North American provider of real-time access to financial data and insights. The deal will likely expand the company’s reach in open banking, an area in which it has been too keen to grow for a while now.

2020 Update

The company reported full-year revenues of $15.3 billion, down 8% on a currency neutral basis. EPS of $6.43 per share also dropped 16% on a currency neutral basis.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -8.74% due to these changes.

VGM Scores

At this time, MasterCard has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, MasterCard has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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