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Mastercard (MA) Q2 Earnings Beat on Strong Consumer Spending
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Mastercard Incorporated (MA - Free Report) reported second-quarter 2023 adjusted earnings of $2.89 per share, which outpaced the Zacks Consensus Estimate by 1.8%. The bottom line advanced 13% year over year. Its shares gained 1.1% in the pre-market trading session, reflecting the outperformance.
Mastercard, the leading technology company in the global payments industry, reported net revenues of $6,269 million, which improved 14% year over year. The top line beat the consensus mark by 1.6%.
The quarterly results gained from strong consumer spending, specifically across the travel sector, and an enhanced services suite. Robust growth in cross-border volume also contributed to the upside. However, the performance was partly offset by an escalating operating cost level.
Mastercard Incorporated Price, Consensus and EPS Surprise
Gross dollar volume (representing the aggregated dollar amount of purchases made and cash disbursements obtained from MasterCard-branded cards) rose 12% on a local-currency basis to $2,267 billion in the quarter under review. The reported figure surpassed our estimate of $2,126.2 billion.
Cross-border volumes (a key measure that tracks spending on cards beyond the issuing country) climbed 24% on a local-currency basis. Switched transactions, which indicate the number of times a company’s products have been used to facilitate transactions, came in at 35,519 million, up 17% year over year in the second quarter.
Value-added services and solutions net revenues of $2,196 million advanced 16% year over year and beat our estimate of $2,170 million. The improvement came on the back of enhanced cyber and intelligence solutions and sustained demand for consulting and marketing services.
Payment network rebates and incentives escalated 22% year over year in the quarter under review. Our estimate indicated the metric to increase 18.1% year over year.
MA’s clients issued 3.2 billion Mastercard and Maestro-branded cards as of Jun 30, 2023.
Operating expenses increased 5% year over year to $2,613 million due to elevated general and administrative expenses and the figure was also higher than our estimate of $2,608.9 million.
Mastercard’s operating income of $3,656 million climbed 21% year over year in the second quarter and outpaced our estimate of $3,581.8 million. The operating margin improved 340 basis points year over year.
Balance Sheet (As of Jun 30, 2023)
Mastercard exited the second quarter with cash and cash equivalents of $6,170 million, which decreased 12% from the figure at 2022 end. The figure stands way higher than the current portion of long-term debt ($1,336 million).
Total assets of $39,004 million inched up 0.7% from the 2022-end level.
Long-term debt amounted to $14,284 million, which increased 3.9% from the figure as of Dec 31, 2022.
Total equity of $5,557 million fell 12.6% from the 2022-end figure.
Cash Flows
In the first half of 2023, Mastercard generated cash flows from operations of $4,617 million, which rose 8.9% from the prior-year comparable period.
Capital Deployment Update
Mastercard bought back 6.5 million shares for $2.4 billion in the second quarter. It had a leftover buyback capacity of $6.4 billion as of Jul 24, 2023.
MA paid out dividends worth $541 million in the quarter under review.
3Q23 Outlook
Management projects net revenues to register low-teens growth on a year-over-year basis in the third quarter of 2023 while operating expenses are anticipated to witness low-single-digit growth.
2023 View
For this year, management expects net revenue growth in the low-teens range from the 2022 reported figure. Operating expenses are forecast to record high-single-digit growth year over year in 2023.
Of the other Business Services sector industry players that have reported second-quarter results so far, the bottom-line results of The Interpublic Group of Companies, Inc. (IPG - Free Report) , Omnicom Group Inc. (OMC - Free Report) and Equifax Inc. (EFX - Free Report) beat the Zacks Consensus Estimate.
Interpublic Group reported second-quarter 2023 adjusted earnings of 74 cents per share, beating the Zacks Consensus Estimate by 23.3% but declining 17.5% on a year-over-year basis. Net revenues of $2.33 billion missed the consensus estimate by 2.9% and decreased 14.9% on a year-over-year basis. IPG’s operating income in the quarter came in at $310.7 million, down 11% from the prior-year quarter’s levels. Adjusted EBITA came in at $331.9 million, decreasing 10.3% from the prior-year quarter’s level.
Omnicom’s second-quarter 2023 earnings of $1.81 per share beat the consensus estimate by 0.6% and increased 7.7% year over year. Total revenues of $3.6 billion lagged the consensus estimate by 0.3% but increased 1.2% year over year. Across fundamental disciplines, revenues from Advertising & Media were up 5.1%, compared with our estimated growth of 6.3%. Precision marketing revenues jumped 2.3%, compared with our estimate of 14% growth. EBITA of OMC in the quarter came in at $570 million, up 1.4% year over year.
Equifax reported second-quarter 2023 adjusted earnings of $1.71 per share, beating the Zacks Consensus Estimate by 2.4% but declining 18.2% from the year-ago figure. Total revenues of $1.32 billion missed the consensus estimate by 0.4% while matching the year-ago figure on a reported basis. The top line gained 1% on a local-currency basis. Revenues in the Workforce Solutions segment of EFX totaled $582.8 million, down 4% from the year-ago quarter’s figure. Adjusted EBITDA in the second quarter totaled $431.3 million, down 30% from the year-ago quarter’s level.
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Mastercard (MA) Q2 Earnings Beat on Strong Consumer Spending
Mastercard Incorporated (MA - Free Report) reported second-quarter 2023 adjusted earnings of $2.89 per share, which outpaced the Zacks Consensus Estimate by 1.8%. The bottom line advanced 13% year over year. Its shares gained 1.1% in the pre-market trading session, reflecting the outperformance.
Mastercard, the leading technology company in the global payments industry, reported net revenues of $6,269 million, which improved 14% year over year. The top line beat the consensus mark by 1.6%.
The quarterly results gained from strong consumer spending, specifically across the travel sector, and an enhanced services suite. Robust growth in cross-border volume also contributed to the upside. However, the performance was partly offset by an escalating operating cost level.
Mastercard Incorporated Price, Consensus and EPS Surprise
Mastercard Incorporated price-consensus-eps-surprise-chart | Mastercard Incorporated Quote
Q2 Operational Performance
Gross dollar volume (representing the aggregated dollar amount of purchases made and cash disbursements obtained from MasterCard-branded cards) rose 12% on a local-currency basis to $2,267 billion in the quarter under review. The reported figure surpassed our estimate of $2,126.2 billion.
Cross-border volumes (a key measure that tracks spending on cards beyond the issuing country) climbed 24% on a local-currency basis. Switched transactions, which indicate the number of times a company’s products have been used to facilitate transactions, came in at 35,519 million, up 17% year over year in the second quarter.
Value-added services and solutions net revenues of $2,196 million advanced 16% year over year and beat our estimate of $2,170 million. The improvement came on the back of enhanced cyber and intelligence solutions and sustained demand for consulting and marketing services.
Payment network rebates and incentives escalated 22% year over year in the quarter under review. Our estimate indicated the metric to increase 18.1% year over year.
MA’s clients issued 3.2 billion Mastercard and Maestro-branded cards as of Jun 30, 2023.
Operating expenses increased 5% year over year to $2,613 million due to elevated general and administrative expenses and the figure was also higher than our estimate of $2,608.9 million.
Mastercard’s operating income of $3,656 million climbed 21% year over year in the second quarter and outpaced our estimate of $3,581.8 million. The operating margin improved 340 basis points year over year.
Balance Sheet (As of Jun 30, 2023)
Mastercard exited the second quarter with cash and cash equivalents of $6,170 million, which decreased 12% from the figure at 2022 end. The figure stands way higher than the current portion of long-term debt ($1,336 million).
Total assets of $39,004 million inched up 0.7% from the 2022-end level.
Long-term debt amounted to $14,284 million, which increased 3.9% from the figure as of Dec 31, 2022.
Total equity of $5,557 million fell 12.6% from the 2022-end figure.
Cash Flows
In the first half of 2023, Mastercard generated cash flows from operations of $4,617 million, which rose 8.9% from the prior-year comparable period.
Capital Deployment Update
Mastercard bought back 6.5 million shares for $2.4 billion in the second quarter. It had a leftover buyback capacity of $6.4 billion as of Jul 24, 2023.
MA paid out dividends worth $541 million in the quarter under review.
3Q23 Outlook
Management projects net revenues to register low-teens growth on a year-over-year basis in the third quarter of 2023 while operating expenses are anticipated to witness low-single-digit growth.
2023 View
For this year, management expects net revenue growth in the low-teens range from the 2022 reported figure. Operating expenses are forecast to record high-single-digit growth year over year in 2023.
Zacks Rank
Mastercard currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Business Services Sector Releases
Of the other Business Services sector industry players that have reported second-quarter results so far, the bottom-line results of The Interpublic Group of Companies, Inc. (IPG - Free Report) , Omnicom Group Inc. (OMC - Free Report) and Equifax Inc. (EFX - Free Report) beat the Zacks Consensus Estimate.
Interpublic Group reported second-quarter 2023 adjusted earnings of 74 cents per share, beating the Zacks Consensus Estimate by 23.3% but declining 17.5% on a year-over-year basis. Net revenues of $2.33 billion missed the consensus estimate by 2.9% and decreased 14.9% on a year-over-year basis. IPG’s operating income in the quarter came in at $310.7 million, down 11% from the prior-year quarter’s levels. Adjusted EBITA came in at $331.9 million, decreasing 10.3% from the prior-year quarter’s level.
Omnicom’s second-quarter 2023 earnings of $1.81 per share beat the consensus estimate by 0.6% and increased 7.7% year over year. Total revenues of $3.6 billion lagged the consensus estimate by 0.3% but increased 1.2% year over year. Across fundamental disciplines, revenues from Advertising & Media were up 5.1%, compared with our estimated growth of 6.3%. Precision marketing revenues jumped 2.3%, compared with our estimate of 14% growth. EBITA of OMC in the quarter came in at $570 million, up 1.4% year over year.
Equifax reported second-quarter 2023 adjusted earnings of $1.71 per share, beating the Zacks Consensus Estimate by 2.4% but declining 18.2% from the year-ago figure. Total revenues of $1.32 billion missed the consensus estimate by 0.4% while matching the year-ago figure on a reported basis. The top line gained 1% on a local-currency basis. Revenues in the Workforce Solutions segment of EFX totaled $582.8 million, down 4% from the year-ago quarter’s figure. Adjusted EBITDA in the second quarter totaled $431.3 million, down 30% from the year-ago quarter’s level.