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Mastercard (MA) Up 3.2% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Mastercard Incorporated (MA. Shares have added about 3.2% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is MA 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 drivers.

Mastercard Q1 Earnings Beat on Volume Growth

Mastercard Incorporated reported first-quarter adjusted earnings per share of $1.50 per share, beating the Zacks Consensus Estimate of $1.26. Earnings improved 43% year over year (on a currency neutral basis).

Better-than-expected results were primarily backed by higher switched transactions, increase in cross-border volume and gross dollar volume as well as gains from acquisitions. An increase in rebates and incentives year over year was a partial dampener.

Strong Operational Performance

Mastercard’s revenues of $3.6 billion in the quarter increased 27% year over year (on a currency neutral basis). The Zacks Consensus Estimate was $3.25 billion. The new revenue recognition rules and acquisitions contributed 4% and 2.5% to the revenue growth, respectively.

Total adjusted operating expenses increased 32% to $1.6 billion. Operating margin contracted 140 basis points to 54.2%, due to higher, general and administrative expenses, advertising and marketing expenses, depreciation and provision for litigation expenses

Gross dollar volume increased 14% to $1.42 trillion while cross-border volumes were up 21% on a local currency basis.

The company’s margins gained from a lower tax rate of 17.3% in the first quarter compared with 26.9% in the year-ago quarter.

As of Mar 31, 2018, the company’s customers had issued 2.4 billion Mastercard and Maestro-branded cards, adjusted for the impact of the Venezuela deconsolidation.

Investment income rose 13% while interest expenses increased 10.3% year over year to $49 million.

Financial Update

As of Mar 31, 2018, the company’s cash and cash equivalents were $6.9 billion, up 16% from the level at year-end 2017. Long-term debt increased 1.8% to $8.95 billion from the mark at 2017-end.

Share Repurchase and Dividend Payment

During the reported quarter, Mastercard repurchased shares worth $1.4 billion and returned $263 million in dividends.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been eight revisions higher for the current quarter compared to two lower.

Mastercard Incorporated Price and Consensus

 

VGM Scores

At this time, MA has a great Growth Score of A, a grade with the same score on the momentum front. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for growth and momentum investors.

Outlook

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




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