Key Takeaways From MasterCard’s Q1

by Trefis Team
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In continuation with its impressive performance over the past few years, MasterCard (NYSE: MA) posted a solid Q1. The company saw revenue growth of 31%, as its core performance remained strong, about in line with our expectations. The company posted strong growth across divisions, with transaction processing fees in the U.S. growing at 27% for the quarter. These trends are similar to what we witnessed in the previous quarters, and mostly in line with our expectations for the company. The lower tax rate of 17.3% in Q4 in comparison to over 26% in the previous year’s comparable quarter was primarily due to the recent tax reform. This led to a 38% growth in net income.

Our price estimate for MasterCard’s stock stands at $171, which is below the market price. We have created an interactive dashboard which shows our forecasts and estimates for the company going forward.  You can modify the key value drivers to see how they impact the company’s revenues, bottom line, and valuation.

The company’s expenses grew more than revenues, so its operating margin decreased by 5 percentage points. 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 14% in the U.S.  Cross border volumes grew at 21% 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 segment. Recent deals with Shell, Kroger, Santander, and Banque Travelex, among others, should help the company continue growing at a strong rate going forward.


Please refer to our complete analysis for MasterCard

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