Earnings Preview: MasterCard Focused On Growing Its Network

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Mastercard

MasterCard (NYSE: MA) is set to report earnings for the first quarter of fiscal year 2017 on Tuesday, May 2nd. In the previous year, the company reported earnings per share growth of 10.1% on revenue growth of 11.5%. The company grew its revenue across streams, with the strongest growth coming from transaction fees, which grew at 18% and other revenues, which grew at 22%. MasterCard charges a transaction fee for every transaction made using a credit or debit card issued by it.

Client incentives and rebates grew at 20%, while overall operating expenses only grew by 9%, leading to the company’s operating margin expanding by 100 basis points. Over the last four years, the company has been spending heavily on marketing and promotions and rebates for customers, in order to bring in more partners into the MasterCard payment network. We expect it will realize the benefits of these efforts over the next three years and as a result expect much of its total revenue growth will come from increases in transaction fees.

MasterCard has been focused on growing its portfolio of co-branding partners and improving its technology to keep pace with the rapidly evolving payments space. On the first front, it has added American Airlines, Bed, Bath & Beyond, PayPal, Walmart Canada and Axis Bank in India. The company also plans to start operations in China soon and expects significant growth in transaction volumes from access to the world’s biggest market (in PPP adjusted terms).

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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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