Mastercard Inc (NYSE:MA) announced financial results for the second quarter of 2015. Excluding a special item, the company reported net income of $965 million, up 4%, or 12% after adjusting for currency, and earnings per diluted share of $0.85, up 6% or 15% adjusted for currency, versus the year-ago period. Including the special item, a $44 million after-tax charge related to a U.K. merchant litigation settlement, the company reported net income of $921 million, a decrease of 1%, or an increase of 7% after adjusting for currency, and earnings per diluted share of $0.81, up 1%, or 9% adjusted for currency, versus the year-ago period. The net income and earnings per diluted share figures, excluding the special item, are reconciled to their comparable GAAP measures in the accompanying tables. Acquisitions had a $0.03 dilutive impact on earnings per diluted share.

Net revenue for the second quarter of 2015 was $2.4 billion, a 1% increase versus the same period in 2014. Adjusted for currency, net revenue increased 7%. Net revenue growth was driven by the impact of the following:

  • An increase in cross-border volumes of 17%;
  • A 13% increase in gross dollar volume, on a local currency basis, to $1.1 trillion; and
  • An increase in processed transactions of 13%, to 12.0 billion.

These factors were partially offset by an increase in rebates and incentives, primarily due to new and renewed agreements and increased volumes. Acquisitions contributed 2 percentage points to total net revenue growth.

Worldwide purchase volume during the quarter was up 12% on a local currency basis versus the second quarter of 2014, to $841 billion. As of June 30, 2015, the company’s customers had issued 2.2 billion MasterCard and Maestro-branded cards.

“Our business continues to perform well with good transaction and volume growth, particularly in cross-border, despite the mixed global economic environment and foreign exchange headwinds,” said Ajay Banga, president and CEO, MasterCard. “We are executing on our strategy to grow our business by focusing on winning new deals in our core payments business, while building out our data analytics, processing and safety applications. A blend of acquisitions and organic investments in these spaces remain at the foundation of our strategy.”

Excluding the special item, total operating expenses increased 9%, or increased 14% when adjusted for currency, to $1.1 billion during the second quarter of 2015 compared to the same period in 2014. Acquisitions contributed 10 percentage points of the FX-adjusted growth, with the remainder primarily due to higher data processing and advertising & marketing expenses. Including the special item, total operating expenses increased 15%, or 21% when adjusted for currency, from the year-ago period.

Operating income for the second quarter of 2015 decreased 5%, or increased 2% adjusted for currency, versus the year-ago period, excluding the special item. The company delivered an operating margin of 54.9%.

MasterCard reported other expense of $10 million in the second quarter of 2015, unchanged from the second quarter of 2014.

MasterCard’s effective tax rate was 25.8% in the second quarter of 2015, versus a rate of 32.2% in the comparable period in 2014, excluding the special item. The decrease was primarily due to a larger repatriation benefit, the recognition of a discrete U.S. foreign tax credit benefit and a more favorable mix of taxable earnings.

During the second quarter of 2015, MasterCard repurchased approximately 9 million shares of Class A common stock at a cost of approximately $849 million. Quarter-to-date through July 22nd, the company repurchased an additional 1.9 million shares at a cost of approximately $182 million, with $2.0 billion remaining under the current repurchase program authorization.

Year-to-Date 2015 Results

For the six months ended June 30, 2015, excluding the special item, MasterCard reported net income of $2.0 billion, an increase of 10%, or 18% after adjusting for currency, and earnings per diluted share of $1.73, up 13%, or 21% adjusting for currency versus the year-ago period. Including the special item, net income was $1.9 billion and earnings per diluted share was $1.69. Acquisitions had a $0.06 dilutive impact on earnings per diluted share.

Net revenue for the first half of 2015 was $4.6 billion, an increase of 2%, or 8% after adjusting for currency, versus the same period in 2014. Gross dollar volume growth of 12%, transaction processing growth of 13% and cross-border volume growth of 18% contributed to the net revenue growth in the year-to-date period. These factors were partially offset by an increase in rebates and incentives. Acquisitions contributed 2 percentage points to total net revenue growth.

Excluding the special item, total operating expenses increased 4%, or 9% after adjusting for currency, to $2.0 billion, for the first half of 2015, compared to the same period in 2014. The increase was entirely due to the impact of acquisitions. Including the special item, total operating expenses increased 8%, or 12% after adjusting for currency.

Excluding the special item, operating income of $2.7 billion was essentially unchanged versus the first half of 2014 or increased 7% adjusted for currency, resulting in an operating margin of 57.7%.

MasterCard’s effective tax rate was 24.9% for the first half of 2015 versus a rate of 32.1% in the same period in 2014, excluding the special item. The decrease was primarily due to the recognition of a discrete U.S. foreign tax credit benefit, a larger repatriation benefit and a more favorable mix of taxable earnings. (Original Source)

As a result of the earnings release, shares of Mastercard are dropping 2.42% in pre-market trading. MA has a 1-year high of $97.76 and a 1-year low of $69.64. The stock’s 50-day moving average is $94.64 and its 200-day moving average is $90.11.

On the ratings front, Mastercard has been the subject of a number of recent research reports. In a report issued on July 20, Oppenheimer analyst Glenn Greene maintained a Buy rating on MA, with a price target of $105, which represents a potential upside of 10.3% from where the stock is currently trading. Separately, on June 29, Suntrust Robinson Humphrey’s Andrew Jeffrey reiterated a Buy rating on the stock and has a price target of $120.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Glenn Greene and Andrew Jeffrey have a total average return of 23.0% and 4.0% respectively. Greene has a success rate of 90.7% and is ranked #14 out of 3718 analysts, while Jeffrey has a success rate of 63.0% and is ranked #1288.

The street is mostly Bullish on MA stock. Out of 7 analysts who cover the stock, 6 suggest a Buy rating and one recommends to Hold the stock. The 12-month average price target assigned to the stock is $98.67, which represents a slight upside potential from current levels.