A month has gone by since the last earnings report for MasterCard (MA - Free Report) . Shares have added about 9.9% 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 drivers.
Mastercard Q1 Earnings Beat Despite Coronavirus Fallout
Mastercard Inc.’s first-quarter 2020 earnings of $1.83 per share beat the Zacks Consensus Estimate by 6.4% and also grew 6% year over year.
Better-than-expected results were primarily driven by higher switched transactions, increase in gross dollar volume and gains from acquisitions.
Rises in rebates and incentives, and a decrease in cross-border volume were partial dampeners. Following strong results, shares of the company were up 5.04% in pre-market trading.
Mastercard’s revenues of $4 billion beat the Zacks Consensus Estimate by 0.9% and also rose 5% year over year. This upside was driven by an increase in gross dollar volume, switched transactions and other revenues, partly offset by higher rebates and incentives and a decline in cross-border business.
Total adjusted operating expenses rose 8% to $1.8 billion due to higher general and administrative expenses.
Adjusted operating margin of 55.3% was down 140 basis points year over year.
Gross dollar volume increased 8% to $1.6 trillion but cross-border volumes slipped 1% on a local-currency basis.
As of Mar 31, 2020, the company’s customers had issued 2.6 billion Mastercard and Maestro-branded cards.
Share Repurchase and Dividend Payout
During the reported quarter, Mastercard bought back shares worth $1.4 billion and paid out $403 million in dividends.
The company for the time being discontinued its share buyback plans as the plaguing impact of COVID-19-related uncertainty persists.
Strong Balance Sheet Position
The company’s long-term debt as of Mar 31, 2020 was $12.5 billion, up 46% because a sum of worth $4-billion long-term debt was issued in March. However, its liquid cash of $10.7 billion along with $6 billion in credit facility is enough to service its debt. The company has significant capacity to take on additional debt, given a strong investment grade ratings of A1 from Moody’s and A+ from S&P ratings.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -24.94% due to these changes.
At this time, MasterCard has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise MasterCard has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.