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Why Is Mastercard (MA) Up 7% Since the Last Earnings Report?
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It has been about a month since the last earnings report for Mastercard Incorporated (MA - Free Report) . Shares have added nearly 7% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
MasterCard Beats on Q4 Earnings as Volume Improves
MasterCard reported earnings of $0.86 per share, surpassing the Zacks Consensus Estimate by $0.01. Earnings were up 8.9% year over year.
Quarterly results were supported by a slight fall in operating expenses. Further, solid growth in volumes was the tailwind.
Including one time charges related to merchant litigation in the UK, net income was $933 million, up 4.8% from the prior-year quarter.
For 2016, earnings of $3.69 per share lagged the Zacks Consensus Estimate of $3.75. However, it was above the prior-year figure of $3.35. Net income was $4.1 billion, up 6.6% from the prior-year quarter. Results included certain one-time special items.
Revenue Growth, Lower Costs Support Results
MasterCard posted revenues of $2.76 billion for the reported quarter, which missed the Zacks Consensus Estimate of $2.78 billion. On a year-over-year basis, revenues increased 9.5%. The upside was primarily driven by a 17% rise in the number of switched transactions (formerly, processed transactions) to 15.2 billion, along with a 13% increase in cross-border volumes. These were partially offset by higher rebates and incentives.
For 2016, revenues of $10.78 billion for the reported quarter missed the Zacks Consensus Estimate of $10.81 billion. On a year-over-year basis, revenues rose 11.5%
During the reported quarter, worldwide purchase volume was $898 billion. As of Dec 31, 2016, 2.3 billion MasterCard and Maestro branded cards were issued.
MasterCard witnessed a year-over-year fall of 1.2% in total operating expenses to $1.39 billion, due to decline in all cost components. The decrease reflects the impact of ongoing cost control efforts.
Operating income was $1.36 billion in the reported quarter, up 23.1% year over year. Interest expenses jumped to $30 million from $12 million in the prior-year quarter.
The company delivered an operating margin of 49.4%.
Strong Balance Sheet
As of Dec 31, 2016, the company’s cash and cash equivalents were $6.72 billion up from $5.75 billion at year-end 2015. Long-term debt increased to $5.18 billion from $3.27 billion as of Dec 31, 2015. Total equity increased to $5.66 billion from $6.03 billion at Dec 31, 2015.
Share Repurchase Update
During the reported quarter, MasterCard repurchased around 11 million shares of Class A common stock worth almost $1.1 billion.
Outlook
For 2017, management expects global economic scenario to be largely in line with 2016 with continued foreign exchange headwind. Net revenue is expected to grow at a low double digit rate on a currency-neutral basis. Adjusted for the FX impact of all currencies, management estimates headwind of a slightly over 2% to net revenue growth and 3% to the bottom line, given the strong dollar relative to the euro and the British pound.
Net revenue growth for first-half 2017 is expected to be lower than the second-half, due to higher incentives related to new and renewed agreements and the roll off of one agreement. For 2017, rebates and incentives on an as-reported basis, is expected exhibit 20% growth reflecting the impact of volume growth and deal activity.
Given the company’s ongoing investments in several areas such as digital, including Masterpass and MDES, safety and security and geographic expansion, management anticipates year-over-year operating expenses to grow in the high single-digit range on a currency-neutral basis. Also, it estimates foreign exchange to have about a 1% benefit to as-reported operating expenses for the year.
Notably, the company will expedite advertising and marketing (A&M) spend into the first-half 2017 to drive the rollout of Masterpass. The company expects first-quarter 2017 A&M spend to increase by about $40 million versus the year-ago quarter.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one downward revision for the current quarter.
At this time, Mastercard's stock has a subpar Growth score of 'D', though it is lagging a lot on the momentum 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.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Notably, the stock has a Zacks Rank #4 (Sell). We are expecting a below average return from the stock in the next few months.
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Why Is Mastercard (MA) Up 7% Since the Last Earnings Report?
It has been about a month since the last earnings report for Mastercard Incorporated (MA - Free Report) . Shares have added nearly 7% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
MasterCard Beats on Q4 Earnings as Volume Improves
MasterCard reported earnings of $0.86 per share, surpassing the Zacks Consensus Estimate by $0.01. Earnings were up 8.9% year over year.
Quarterly results were supported by a slight fall in operating expenses. Further, solid growth in volumes was the tailwind.
Including one time charges related to merchant litigation in the UK, net income was $933 million, up 4.8% from the prior-year quarter.
For 2016, earnings of $3.69 per share lagged the Zacks Consensus Estimate of $3.75. However, it was above the prior-year figure of $3.35. Net income was $4.1 billion, up 6.6% from the prior-year quarter. Results included certain one-time special items.
Revenue Growth, Lower Costs Support Results
MasterCard posted revenues of $2.76 billion for the reported quarter, which missed the Zacks Consensus Estimate of $2.78 billion. On a year-over-year basis, revenues increased 9.5%. The upside was primarily driven by a 17% rise in the number of switched transactions (formerly, processed transactions) to 15.2 billion, along with a 13% increase in cross-border volumes. These were partially offset by higher rebates and incentives.
For 2016, revenues of $10.78 billion for the reported quarter missed the Zacks Consensus Estimate of $10.81 billion. On a year-over-year basis, revenues rose 11.5%
During the reported quarter, worldwide purchase volume was $898 billion. As of Dec 31, 2016, 2.3 billion MasterCard and Maestro branded cards were issued.
MasterCard witnessed a year-over-year fall of 1.2% in total operating expenses to $1.39 billion, due to decline in all cost components. The decrease reflects the impact of ongoing cost control efforts.
Operating income was $1.36 billion in the reported quarter, up 23.1% year over year. Interest expenses jumped to $30 million from $12 million in the prior-year quarter.
The company delivered an operating margin of 49.4%.
Strong Balance Sheet
As of Dec 31, 2016, the company’s cash and cash equivalents were $6.72 billion up from $5.75 billion at year-end 2015. Long-term debt increased to $5.18 billion from $3.27 billion as of Dec 31, 2015. Total equity increased to $5.66 billion from $6.03 billion at Dec 31, 2015.
Share Repurchase Update
During the reported quarter, MasterCard repurchased around 11 million shares of Class A common stock worth almost $1.1 billion.
Outlook
For 2017, management expects global economic scenario to be largely in line with 2016 with continued foreign exchange headwind. Net revenue is expected to grow at a low double digit rate on a currency-neutral basis. Adjusted for the FX impact of all currencies, management estimates headwind of a slightly over 2% to net revenue growth and 3% to the bottom line, given the strong dollar relative to the euro and the British pound.
Net revenue growth for first-half 2017 is expected to be lower than the second-half, due to higher incentives related to new and renewed agreements and the roll off of one agreement. For 2017, rebates and incentives on an as-reported basis, is expected exhibit 20% growth reflecting the impact of volume growth and deal activity.
Given the company’s ongoing investments in several areas such as digital, including Masterpass and MDES, safety and security and geographic expansion, management anticipates year-over-year operating expenses to grow in the high single-digit range on a currency-neutral basis. Also, it estimates foreign exchange to have about a 1% benefit to as-reported operating expenses for the year.
Notably, the company will expedite advertising and marketing (A&M) spend into the first-half 2017 to drive the rollout of Masterpass. The company expects first-quarter 2017 A&M spend to increase by about $40 million versus the year-ago quarter.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one downward revision for the current quarter.
Mastercard Incorporated Price and Consensus
Mastercard Incorporated Price and Consensus | Mastercard Incorporated Quote
VGM Scores
At this time, Mastercard's stock has a subpar Growth score of 'D', though it is lagging a lot on the momentum 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.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Notably, the stock has a Zacks Rank #4 (Sell). We are expecting a below average return from the stock in the next few months.