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Mastercard's (MA) Q1 Earnings Beat on Expanding Payment Network
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Mastercard Incorporated (MA - Free Report) reported first-quarter 2023 adjusted earnings of $2.80 per share, which beat the Zacks Consensus Estimate by 3.3%. The bottom line inched up 1% year over year.
The leading technology company in the global payments industry, Mastercard’s net revenues climbed 11% year over year to $5,748 million. The top line outpaced the consensus mark by 2.1% and our estimate of $5,616.3 million.
The quarterly results benefited on the back of improved cross-border travel coupled with an expanding payment network and value-added services and solutions. However, the upside was partly offset by an escalating operating expense level.
Mastercard Incorporated Price, Consensus and EPS Surprise
Gross dollar volume or GDV (representing the aggregated dollar amount of purchases made and cash disbursements obtained from MasterCard-branded cards) amounted to $2,108 billion in the first quarter, up 15% year over year on a local-currency basis. The reported figure came higher than the Zacks Consensus Estimate of $2,049 billion and our estimate of $2,065.7 billion.
Cross-border volumes (a key measure that tracks spending on cards beyond the issuing country) soared 35% year over year on a local-currency basis. Switched transactions, which indicate the number of times a company’s products are used to facilitate transactions, rose 12% year over year to 32,464 million. The figure outpaced the consensus mark of 31,403 million.
Value-added services and solutions net revenues of $2,098 million grew 19% year over year, which encompassed a 1% contribution from buyouts. The remaining growth resulted from enhanced cyber and intelligence solutions and solid demand for fraud solutions.
Payment network rebates and incentives escalated 25% year over year in the quarter under review.
MA’s clients issued 3.2 billion Mastercard and Maestro-branded cards as of Mar 31, 2023.
Operating expenses of $2,612 million increased 18% year over year due to an elevated higher general and administrative expense level.
Mastercard reported an operating income of $3,136 million, which advanced 6% year over year but fell short of our estimate of $3,246.9 million. Operating margin of 54.6% deteriorated 250 basis points year over year.
Balance Sheet (as of Mar 31, 2023)
Mastercard exited the first quarter with cash and cash equivalents of $6,566 million, which tumbled 6.3% from the 2022-end level. The figure stands way higher than the current portion of long-term debt ($276 million).
Total assets of $38,936 million inched up 0.5% from the figure at 2022 end.
Long-term debt amounted to $15,292 million, which increased 11.2% from the figure as of Dec 31, 2022.
Total equity declined 15.3% from the 2022-end figure to $5,386 million.
Cash Flows
In the reported quarter, net cash provided by operating activities rose 7.7% year over year to $1,919 million.
Capital Deployment Update
Mastercard bought back 8 million shares for $2.9 billion in the first quarter. It had a leftover buyback capacity of $8.7 billion as of Apr 24, 2023.
MA paid out dividends worth $545 million in the quarter under review.
2Q23 Outlook
Management anticipates net revenues to register the high-end of low-double-digit growth on a year-over-year basis while operating expenses are estimated to witness mid-single-digit growth.
2023 Outlook Updated
Management continues to expect net revenue growth in the low-teens range in 2023 from the 2022 figure. Meanwhile, operating expenses are presently forecasted to record high single-digit growth year over year, whereas the earlier outlook called for the metric to grow in mid-single-digits.
Of the other Business Services sector industry players that have reported March-quarter results so far, the bottom-line results of Visa Inc. (V - Free Report) , Omnicom Group Inc. (OMC - Free Report) and Xerox Holdings Corporation (XRX - Free Report) beat the respective Zacks Consensus Estimate.
Visa reported second-quarter fiscal 2023 earnings of $2.09 per share, which beat the Zacks Consensus Estimate of $1.97 by 6.1% and our estimate of $1.92. The bottom line improved 17% year over year. Net revenues of V amounted to $7,985 million, which advanced 11% year over year in the quarter under review. The top line outpaced the consensus mark by 3% and our estimate of $7,596.9 million. Its payment volume grew 10% year over year on a constant-dollar basis in the fiscal second quarter, while processed transactions (implying transactions processed by Visa) totaled 50.1 billion, which rose 12% year over year.
Omnicom’s first-quarter 2023 earnings of $1.56 per share beat the consensus estimate by 13% and our estimates by 11.4%. The bottom line increased 12.2% year over year. Total revenues of $3.4 billion surpassed the consensus estimate by 2.3% and our estimate by 1.4%. The top line of OMC increased 1% year over year. Across fundamental disciplines, revenues from Advertising & Media were up 5.1%, Precision marketing revenues jumped 7%, Execution & Support revenues increased 3.6% and Commerce and Brand Consulting revenues were up 3.3%.
Xerox posted first-quarter 2023 adjusted EPS of 49 cents, which beat the Zacks Consensus Estimate and exceeded the year-ago figure, both by more than 100%. The bottom line surpassed our estimate by more than 100% as well. Total revenues of $1.7 billion surpassed the consensus mark by a slight margin and increased 2.8% year over year on a reported basis. The top line surpassed our estimate by 1.6%. XRX’s Print and Other segment’s revenues totaled $1.6 billion, up 4.1% year over year. The Financing segment’s revenues totaled $154 million, down 2.5% year over year.
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Mastercard's (MA) Q1 Earnings Beat on Expanding Payment Network
Mastercard Incorporated (MA - Free Report) reported first-quarter 2023 adjusted earnings of $2.80 per share, which beat the Zacks Consensus Estimate by 3.3%. The bottom line inched up 1% year over year.
The leading technology company in the global payments industry, Mastercard’s net revenues climbed 11% year over year to $5,748 million. The top line outpaced the consensus mark by 2.1% and our estimate of $5,616.3 million.
The quarterly results benefited on the back of improved cross-border travel coupled with an expanding payment network and value-added services and solutions. However, the upside was partly offset by an escalating operating expense level.
Mastercard Incorporated Price, Consensus and EPS Surprise
Mastercard Incorporated price-consensus-eps-surprise-chart | Mastercard Incorporated Quote
Q1 Operational Performance
Gross dollar volume or GDV (representing the aggregated dollar amount of purchases made and cash disbursements obtained from MasterCard-branded cards) amounted to $2,108 billion in the first quarter, up 15% year over year on a local-currency basis. The reported figure came higher than the Zacks Consensus Estimate of $2,049 billion and our estimate of $2,065.7 billion.
Cross-border volumes (a key measure that tracks spending on cards beyond the issuing country) soared 35% year over year on a local-currency basis. Switched transactions, which indicate the number of times a company’s products are used to facilitate transactions, rose 12% year over year to 32,464 million. The figure outpaced the consensus mark of 31,403 million.
Value-added services and solutions net revenues of $2,098 million grew 19% year over year, which encompassed a 1% contribution from buyouts. The remaining growth resulted from enhanced cyber and intelligence solutions and solid demand for fraud solutions.
Payment network rebates and incentives escalated 25% year over year in the quarter under review.
MA’s clients issued 3.2 billion Mastercard and Maestro-branded cards as of Mar 31, 2023.
Operating expenses of $2,612 million increased 18% year over year due to an elevated higher general and administrative expense level.
Mastercard reported an operating income of $3,136 million, which advanced 6% year over year but fell short of our estimate of $3,246.9 million. Operating margin of 54.6% deteriorated 250 basis points year over year.
Balance Sheet (as of Mar 31, 2023)
Mastercard exited the first quarter with cash and cash equivalents of $6,566 million, which tumbled 6.3% from the 2022-end level. The figure stands way higher than the current portion of long-term debt ($276 million).
Total assets of $38,936 million inched up 0.5% from the figure at 2022 end.
Long-term debt amounted to $15,292 million, which increased 11.2% from the figure as of Dec 31, 2022.
Total equity declined 15.3% from the 2022-end figure to $5,386 million.
Cash Flows
In the reported quarter, net cash provided by operating activities rose 7.7% year over year to $1,919 million.
Capital Deployment Update
Mastercard bought back 8 million shares for $2.9 billion in the first quarter. It had a leftover buyback capacity of $8.7 billion as of Apr 24, 2023.
MA paid out dividends worth $545 million in the quarter under review.
2Q23 Outlook
Management anticipates net revenues to register the high-end of low-double-digit growth on a year-over-year basis while operating expenses are estimated to witness mid-single-digit growth.
2023 Outlook Updated
Management continues to expect net revenue growth in the low-teens range in 2023 from the 2022 figure. Meanwhile, operating expenses are presently forecasted to record high single-digit growth year over year, whereas the earlier outlook called for the metric to grow in mid-single-digits.
Zacks Rank
Mastercard currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Business Services Sector Releases
Of the other Business Services sector industry players that have reported March-quarter results so far, the bottom-line results of Visa Inc. (V - Free Report) , Omnicom Group Inc. (OMC - Free Report) and Xerox Holdings Corporation (XRX - Free Report) beat the respective Zacks Consensus Estimate.
Visa reported second-quarter fiscal 2023 earnings of $2.09 per share, which beat the Zacks Consensus Estimate of $1.97 by 6.1% and our estimate of $1.92. The bottom line improved 17% year over year. Net revenues of V amounted to $7,985 million, which advanced 11% year over year in the quarter under review. The top line outpaced the consensus mark by 3% and our estimate of $7,596.9 million. Its payment volume grew 10% year over year on a constant-dollar basis in the fiscal second quarter, while processed transactions (implying transactions processed by Visa) totaled 50.1 billion, which rose 12% year over year.
Omnicom’s first-quarter 2023 earnings of $1.56 per share beat the consensus estimate by 13% and our estimates by 11.4%. The bottom line increased 12.2% year over year. Total revenues of $3.4 billion surpassed the consensus estimate by 2.3% and our estimate by 1.4%. The top line of OMC increased 1% year over year. Across fundamental disciplines, revenues from Advertising & Media were up 5.1%, Precision marketing revenues jumped 7%, Execution & Support revenues increased 3.6% and Commerce and Brand Consulting revenues were up 3.3%.
Xerox posted first-quarter 2023 adjusted EPS of 49 cents, which beat the Zacks Consensus Estimate and exceeded the year-ago figure, both by more than 100%. The bottom line surpassed our estimate by more than 100% as well. Total revenues of $1.7 billion surpassed the consensus mark by a slight margin and increased 2.8% year over year on a reported basis. The top line surpassed our estimate by 1.6%. XRX’s Print and Other segment’s revenues totaled $1.6 billion, up 4.1% year over year. The Financing segment’s revenues totaled $154 million, down 2.5% year over year.