Banking & Finance

Why Mastercard Earnings Proved Lackluster

Mastercard Inc. (NYSE: MA) reported its third-quarter financial results before the markets opened on Wednesday. The firm said that it had $1.60 in earnings per share (EPS) and $3.8 billion in revenue, which compared with consensus estimates of $1.66 in EPS and revenue of $3.95 billion. The same period of last year reportedly had EPS of $2.15 on $4.47 billion in revenue.

During the latest quarter, net revenue decreased 14% on both a reported and currency-neutral basis, reflecting the impact of the pandemic. This was driven by a cross-border volume decline of 36% on a local currency basis and relatively flat rebates and incentives.

However, somewhat offsetting the decline was gross dollar volume growth of 1% to $1.6 trillion, switched transactions growth of 5% and other revenues growth of 5%.

On the plus side, total operating expenses decreased 4%, or 5% on a currency-neutral basis. Excluding acquisitions, expenses decreased 8%, primarily related to lower advertising and marketing, travel, personnel costs and professional fee spend.

By the end of the September quarter, the company’s customers had issued 2.7 billion Mastercard and Maestro branded cards.

For the third quarter, Mastercard repurchased approximately 6.5 million shares at a cost of $2.1 billion and paid $402 million in dividends. On the books, the company ended the quarter with cash and cash equivalents totaling $10.23 billion, up from $6.99 billion at the end of the previous fiscal year.

The company did not issue any guidance in the report. However, analysts are calling for $1.82 in EPS and $4.36 billion in revenue for the fourth quarter.

Mastercard stock traded down 6.5% Wednesday to $296.56, in a 52-week range of $199.99 to $367.25. The consensus price target is $361.47.