Earnings Review: Master Card Posts Another Strong Set Of Results

November 1st, 2016 by Trefis Team
+3.09%
Upside
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MA: Mastercard logo
MA
Mastercard

Master Card (NYSE: MA) posted an extremely strong set of third quarter results for the financial year 2016. The company reported an earnings per share (EPS) growth of 25.6% on a revenue growth of 13.8%. The company’s core performance continues to be extremely strong, in line with our expectations. The company posted strong growth across all business divisions, with transaction processing fees in the U.S. growing at 19% for the quarter. The only downside for the company was that client incentives and rebates grew faster than overall revenue growth at 20.2%. These trends are similar to what we witnessed in the previous quarters and in line with our expectations for the company. We’ve written about how increased spending on marketing and promotions will drive the company’s expense growth going forward and how the company can benefit from this trend.

ma q3

ma q32

As the table above shows, the company has become much more efficient with its spending, getting higher revenue growth per unit dollar spent compared to the same quarter in the previous fiscal year. This bodes well for the company as it aims to grow its transaction volumes both in the U.S. and internationally. Gross dollar volume (GDV) of processed transactions grew at 5% in the U.S. Cross border volumes grew at 12% on a local currency basis. The number of processed transactions grew at 18% globally,

Going forward, Master Card continues to be focused on expanding its network of co-branding partners and improving technology to compete in the rapidly growing online payments business segment. Recent deals with American Airlines, Bed, Bath & Beyond, PayPal in the U.S., Walmart in Canada and China, Axis Bank in India and Amadeus (an international travel company) will help the company on the first front. Thus, we expect the company to continue growing at a strong rate going forward.

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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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