Mastercard Inc (NYSE:MA) announced financial results for the second quarter of 2016. The company reported net income of $983 million, an increase of 7% or 8% on a currency-neutral basis, and earnings per diluted share of $0.89, up 10% or 11% on a currency-neutral basis versus the year-ago period. Excluding special items related to separate U.K. merchant litigations taken in both this quarter and the previous year’s quarter, the company reported net income of $1.1 billion, an increase of 10% or 11% on a currency-neutral basis, and earnings per diluted share of $0.96, up 13% or 14% on a currency-neutral basis versus the year-ago period.

Net revenue for the second quarter of 2016 was $2.7 billion, a 13% increase versus the same period in 2015. On a currency-neutral basis, net revenue increased 14%. Net revenue growth was driven by the impact of the following:

  • An increase in processed transactions of 14%, to 13.7 billion;
  • An 11% increase in gross dollar volume, on a local currency basis, to $1.2 trillion; and
  • An increase in cross-border volumes of 10%.

These factors were partially offset by an increase in rebates and incentives, primarily due to increased volumes and new and renewed agreements.

Worldwide purchase volume during the quarter was up 9% on a local currency basis versus the second quarter of 2015, to $897 billion. As of June 30, 2016, the company’s customers had issued 2.3 billion MasterCard and Maestro-branded cards.

“We carried solid momentum into the second quarter, delivering 14 percent revenue growth for the first half of the year, after adjusting for currency,” said Ajay Banga, president and CEO, MasterCard. “With last week’s VocaLink announcement, we will expand our capabilities beyond core card-based solutions into a broader set of transactions and payments. The collective technology and experience will provide consumers, businesses and governments more choice and value in how they pay and are paid.”

Total operating expenses increased 15%, or 17% on a currency-neutral basis, to $1.3 billion during the second quarter of 2016 compared to the same period in 2015. Excluding special items, total operating expenses were $1.2 billion, an increase of 12%, or 13% on a currency-neutral basis, compared to the year-ago period. The increase was primarily due to continued investments in strategic initiatives, as well as higher legal costs.

Operating income for the second quarter of 2016 increased 10%, or 11% on a currency-neutral basis, versus the year-ago period. Excluding special items, operating income increased 13%, or 15% on a currency-neutral basis, versus the year-ago period. The company delivered an operating margin of 51.2% or 55.2% excluding special items.

MasterCard reported other expense of $15 million in the second quarter of 2016, versus $10 million in the second quarter of 2015. The change was mainly driven by higher interest expense related to the company’s Euro bond debt issuance in November 2015.

MasterCard’s effective tax rate was 28.0% in the second quarter of 2016, versus a rate of 25.7% in the comparable period in 2015. Excluding special items, the effective tax rate was 27.9% in the second quarter of 2016, versus a rate of 25.8% in the comparable period in 2015. The increase was primarily due to the recognition of a discrete U.S. foreign tax credit benefit which occurred in the second quarter of 2015, as well as a larger 2015 repatriation benefit.

During the second quarter of 2016, MasterCard repurchased approximately 5 million shares of Class A common stock at a cost of $462 million. Quarter-to-date through July 21, the company did not repurchase any additional shares, which leaves $2.7 billion remaining under the current repurchase program authorization.

Year-to-Date 2016 Results

For the six months ended June 30, 2016, MasterCard reported net income of $1.9 billion, essentially flat, or an increase of 2% on a currency-neutral basis, and earnings per diluted share of $1.75, up 4% or 6% on a currency-neutral basis versus the year-ago period. Excluding special items, net income was $2.0 billion, up 2% or 4% on a currency-neutral basis, and earnings per diluted share was $1.82, up 5%, or 8% on a currency-neutral basis, compared to the same period in 2015.

Net revenue for the first half of 2016 was $5.1 billion, an increase of 11%, or 14% on a currency-neutral basis, versus the same period in 2015. Transaction processing growth of 14%, gross dollar volume growth of 12% and cross-border volume growth of 11% contributed to the net revenue growth in the year-to-date period. These factors were partially offset by an increase in rebates and incentives.

Total operating expenses were $2.4 billion, an increase of 20%, or 22% on a currency-neutral basis for the first half of 2016, compared to the same period in 2015. Excluding special items, total operating expenses were $2.3 billion, an increase of 18%, or 20% on a currency-neutral basis, compared to the same period in 2015. The increase was primarily due to continued investments to support strategic initiatives, as well as higher legal costs. In addition, the impact from foreign currency hedging activity and balance sheet remeasurement had a negative impact of approximately 6 percentage points on operating expense growth, compared to the same period in 2015.

Operating income for the six months ended June 30, 2016 was $2.7 billion, an increase of 5%, or 8% on a currency-neutral basis, versus the same period in 2015. Excluding special items, operating income was $2.8 billion, an increase of 6%, or 9% on a currency-neutral basis, compared to the same period in 2015. The company delivered an operating margin of 53.1% or 55.2% excluding special items.

MasterCard’s effective tax rate was 28.1% for six months ended June 30, 2016, versus a rate of 24.8% in the same period in 2015. Excluding special items, the effective tax rate was 28.1% in the first half of 2016, versus a rate of 24.9% in the comparable period in 2015. The increase was primarily due to the recognition of a discrete U.S. foreign tax credit benefit which occurred in 2015, as well as a larger 2015 repatriation benefit. (Original Source)

Shares of Mastercard closed yesterday at $93.75, up $0.32 or 0.34%. MA has a 1-year high of $101.76 and a 1-year low of $74.61. The stock’s 50-day moving average is $92.03 and its 200-day moving average is $91.59.

On the ratings front, Mastercard has been the subject of a number of recent research reports. In a report issued on July 22, Robert W. Baird analyst David Koning maintained a Buy rating on MA, with a price target of $115, which implies an upside of 22.7% from current levels. Separately, on July 21, RBC’s Daniel Perlin reiterated a Buy rating on the stock and has a price target of $110.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, David Koning and Daniel Perlin have a total average return of 7.7% and 9.8% respectively. Koning has a success rate of 59.7% and is ranked #633 out of 4087 analysts, while Perlin has a success rate of 71% and is ranked #447.

Overall, one research analyst has assigned a Hold rating and 14 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $109.75 which is 17.1% above where the stock closed yesterday.