Back to top

Image: Bigstock

Mastercard (MA) Q1 Earnings Beat Despite Coronavirus Fallout

Read MoreHide Full Article

Mastercard Inc.’s (MA - Free Report) first-quarter 2020 earnings of $1.83 per share beat the Zacks Consensus Estimate by 6.4% and also grew 6% year over year.

Better-than-expected results were primarily driven by higher switched transactions, increase in gross dollar volume and gains from acquisitions.

Rises in rebates and incentives, and a decrease in cross-border volume were partial dampeners/downsides/negatives. Following strong results, shares of the company were up 5.04% in pre-market trading.

Mastercard’s revenues of $4 billion beat the Zacks Consensus Estimate by 0.9% and also rose 5% year over year. This upside was driven by an increase in gross dollar volume, switched transactions and other revenues, partly offset by higher rebates and incentives and a decline in cross-border business.

Mastercard Incorporated Price, Consensus and EPS Surprise

 

Total adjusted operating expenses rose 8% to $1.8 billion due to higher general and administrative expenses.

Adjusted operating margin of 55.3% was down 140 basis points year over year.
.
Gross dollar volume increased 8% to $1.6 trillion but cross-border volumes slipped 1% on a local-currency basis.

As of Mar 31, 2020, the company’s customers had issued 2.6 billion Mastercard and Maestro-branded cards.

Share Repurchase and Dividend Payout

During the reported quarter, Mastercard bought back shares worth $1.4 billion and paid out $403 million in dividends.

The company for the time being discontinued its share buyback plans as the plaguing impact of COVID-19-related uncertainty persists.    

Strong Balance Sheet Position

The company’s long-term debt as of Mar 31, 2020 was $12.5 billion, up 46% because a sum of worth $4-billion long-term debt was issued in March.  However, its liquid cash of $10.7 billion along with $6 billion in credit facility is enough to service its debt. The company has significant capacity to take on additional debt, given a strong investment grade ratings of A1 from Moody’s and A+ from S&P ratings.

Our Take

Despite the COVID-19-led business disruption, which ate into the company’s cross-border revenues, overall earnings gained from expansion in gross dollar volumes.

The company’s strategy to invest in organic and inorganic growth opportunities bodes well. Its strong brand name, vast business network, global presence, investment in technology, several partnerships, tie-ups and acquisitions should help it easily tide over the current economic difficulties that dented its earnings.

Some other companies in the same space that already released their first-quarter earnings are American Express Co. (AXP - Free Report) , which beat on earnings by 17.2% and Discover Financial Services (DFS - Free Report) , missing on the same by 118.4%. Further, Visa Inc. (V - Free Report) is scheduled to release second-quarter fiscal 2020 earnings on Apr 30.  

Mastercard carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

Zacks Top 10 Stocks for 2020

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?

Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.

Access Zacks Top 10 Stocks for 2020 today >>

Published in