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MasterCard (MA) Up 5.3% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for MasterCard (MA - Free Report) . Shares have added about 5.3% 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 Q3 Earnings & Revenues Beat on Volume Growth

Mastercard reported third-quarter earnings of $2.15 per share, beating the Zacks Consensus Estimate by 7%. Earnings improved 21% year over year.

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

Strong Operational Performance

Mastercard’s revenues of $4.5 billion beat the Zacks Consensus Estimate by 1.7% and were up 15% year over year.

Total adjusted operating expenses rose 15% to $1.8 billion, due to the company’s continued investment in strategic initiatives. Interest expenses of $63 million increased 31% year over year.

Adjusted operating margin remained unchanged year over year at 59.4%.
Gross dollar volume increased 14% to $1.7 trillion while cross-border volumes were up 17% on a local-currency basis.

As of Sep 30, 2019, the company’s customers had issued 2.6 billion Mastercard and Maestro-branded cards.

Financial Update

As of Sep 30, 2019, the company’s cash and cash equivalents were $5.1 billion, down 23.6% from year-end 2018 level. Long-term debt was $7.7 billion, up 33% from Dec 31, 2018.

Share Repurchase and Dividend Payout

During the reported quarter, Mastercard repurchased shares worth $1.8 billion and paid out $335 million in dividends.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, MasterCard has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, 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 D. 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 #2 (Buy). We expect an above average return from the stock in the next few months.


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