Earnings Review: Master Card Posts An Extremely Strong Set Of Results Despite FX Headwinds

July 29th, 2016 by Trefis Team
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Mastercard

Master Card (NYSE: MA) posted an extremely strong set of second quarter results for the financial year 2016, despite currency headwinds. In neutral currency terms, the company reported an earnings per share (EPS) growth of 14% on a revenue growth of 14%. In currency adjusted terms, the EPS grew by 10.6% on a revenue growth of 12.7%. The company’s core performance continues to be extremely strong, as we expected. Revenue grew across all business divisions, with transaction processing fees in the U.S. growing at 21% for the quarter. The only downside for the company was that client incentives and rebates grew faster than overall revenue growth at 21.6%.

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Gross dollar volume (GDV) of processed transactions grew at 8% in the U.S. and 13% outside the U.S. on a local currency basis. Cross border volumes grew at 10% on a local currency basis. The number of processed transactions grew at 14% globally to reach $ 13.7 billion, with the number of Master Card issued cards in circulation growing at 7% to 2.3 billion.

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Going forward, the focus for Master Card continues to be on bringing more partners for co-branding into its network and improving technology to compete in the rapidly growing online payments business segment. On the first front, the company signed agreements with new companies both in the U.S. and in key international markets. Some of the more important deals in this space include the deal with American Airlines, Bed, Bath & Beyond and PayPal in the U.S.; Walmart in Canada and China; Axis Bank in India and Amadeus, an international travel company. On the latter front, the company has announced the planned acquisition of 92% stake in U.K. based company VocaLink, giving it access to the Automated Clearing House (ACH) markets in Europe, Sweden, Singapore and Thailand. Additionally, the acquisition will give Master Card access to business-to-business, peer-to-peer and government payments markets. Given all these factors, we expect Master Card to continue doing well, despite the presence of unfavorable macro economic conditions in many key markets for the company.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for MasterCard
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