MasterCard Inc. (MA, Financial) recently reported its first quarter results for fiscal 2015 with estimate-beating earnings, although revenues missed market expectations. MasterCard logged non-GAAP operational earnings of 91 cents a share for the quarter, beating the company’s earnings of 73 cents a share in the year-ago quarter and squarely beating the consensus estimate of 80 cents a share. While the company has managed to keep its earnings streak alive in the last four quarters, revenues for the quarter came in at $2.23 billion, missing the consensus estimate of $2.29 billion by a slight margin. Following the results, MasterCard shares climbed to a new 52-week high of $93.59 before closing at $90.25.
Top-line Benefits from Increase in Processed Transactions
As of March 31, 2015, MasterCard has issued more than 2.2 billion Maestro and MasterCard-branded cards. MasterCard’s revenue grew 8% on a constant currency basis and 3% year-over-year to $2.23 billion during Q1 2015, with acquisitions during the quarter contributing to 2% of the company’s revenue growth. The company also logged 21.9% growth in EPS to 89 cents per share, including the dilutive effect of 2 cents a share from acquisitions. Further, MasterCard reported a 1% drop to $879 million in operating expenses for the quarter due to ongoing cost-management initiatives as well as foreign exchange gains. While interest expenses grew from $6 million in the prior-year quarter to $17 million in Q1 2015, MasterCard saw its operating income growing 5% year-over-year to $1.35 billion.
MasterCard saw an improvement in its top-line owing to a 12% increase in the number of processed transactions to 11 billion, lower tax rate and robust 12% growth in gross dollar value to $1.1 trillion during the quarter. While the company saw a 19% increase in cross-border transaction volumes, global purchase volumes also grew 12% year-over-year to $783 billion on a constant currency basis. However, the improved results were partially offset by higher incentives and rebates, owing mainly to new as well as renewed business alliances.
MasterCard, which competes with Visa Inc. (V, Financial), Discover Financial Services (DFS, Financial) and American Express (AXP, Financial) in the Credit Services marketplace, also repurchased 11 million shares worth $947 million during Q1 2015. The company has bought back nearly 2.7 million shares worth $240 million during the last year and is left with $2.8 billion worth of authorised shares under its current buyback program.
Final Thoughts
MasterCard delivered yet another quarter of upbeat results with earnings that comfortably beat the consensus estimate, although revenues fell shy of the expected figure. The company’s results were bolstered by strong growth in the number of processed transactions as well as growth in gross dollar value. While MasterCard did not feel the pinch of a strong dollar during the first quarter of fiscal 2015, the company said it expects to face negative foreign currency headwinds in the remainder of the fiscal year. While consensus for the second quarter ending June 2015 is 88 cents a share, experts are looking at an average annual earnings growth rate of nearly 17% for MasterCard over the next five years. Consequently, the MasterCard stock currently carries a ‘buy’ guidance.
