Key Takeaways From MasterCard’s Q3 Earnings

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MA: Mastercard logo
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Mastercard

In continuation with an impressive performance over the first half of the year, MasterCard (NYSE: MA) posted a strong Q3 on Tuesday, October 31. The company reported EPS growth of 24% on revenue growth of 18%. The company’s core performance continues to be strong, in line with our expectations. The company posted strong growth across all divisions, with transaction processing fees in the U.S. growing at 22% for the quarter. The only downside for the company was that client incentives and rebates grew faster than overall revenue growth at 20%. These trends are similar to what we witnessed in the previous quarters and in line with our expectations for the company.

The company’s expenses grew at the same pace as revenues, meaning that the company’s operating margin stayed just about flat. Going forward, we expect MasterCard’s expenditures on sales and marketing, and client incentives to grow slower, especially as it integrates the capabilities of NuData Security into its software suite. Credit card customers are increasingly preferring security and ease of use over reward points, and the company’s focus in this direction can have a significant impact on the bottom line, as well as helping to grow its transaction volumes both in the U.S. and internationally. In this quarter, Gross dollar volume (GDV) of processed transactions grew at 10% in the U.S.  Cross border volumes grew at 15% on a local currency basis.

Going forward, MasterCard 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 Paypal, Bank of America, Santander and Banque Travelex among others, should 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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We currently have a price estimate of $109 for MasterCard, which is significantly below the current market price.

Please refer to our complete analysis for MasterCard

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