Mastercard Inc (NYSE:MA) announced financial results for the first quarter of 2016. The company reported net income of $959 million, a decrease of 6%, or 2% on a currency-neutral basis, and earnings per diluted share of $0.86, down 3%, or up 1% on a currency-neutral basis, versus the year-ago period. As expected, earnings per diluted share were unfavorably impacted by $0.08 due to the non-recurrence of a discrete tax credit and balance sheet remeasurement related to Venezuela in last year’s first quarter.
Net revenue for the first quarter of 2016 was $2.4 billion, a 10% 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 12.6 billion;
- A 13% increase in gross dollar volume, on a local currency basis, to $1.1 trillion; and
- An increase in cross-border volumes of 12%.
These factors were partially offset by an increase in rebates and incentives, primarily due to new and renewed agreements and increased volumes.
Worldwide purchase volume during the quarter was up 12% on a local currency basis versus the first quarter of 2015, to $838 billion. As of March 31, 2016, the company’s customers had issued 2.3 billion MasterCard and Maestro-branded cards.
“The year is off to a good start with solid growth in revenue due to strong volume and transaction levels this quarter,” said Ajay Banga, president and CEO, MasterCard. “We continue to deliver against our strategy, looking to our investments and acquisitions to create a better cardholder experience, supported by a relentless commitment to security. Our encryption and token services are helping to support new ways to pay in an increasingly digital world, while our APT and Pinpoint businesses are helping to drive stronger connections between merchants and their customers.”
Total operating expenses increased 25%, or 29% on a currency-neutral basis, to $1.1 billion during the first quarter of 2016 compared to the same period in 2015. The increase was primarily due to the difference between foreign exchange gains related to currency hedging and balance sheet remeasurement which occurred in last year’s first quarter versus foreign exchange losses on currency hedging in the first quarter of 2016. Additionally, this year’s period included the impact of higher investments to support our strategic initiatives.
Operating income for the first quarter of 2016 was flat, or up 4% on a currency-neutral basis, versus the year-ago period. The company delivered an operating margin of 55.1%.
MasterCard reported other expense of $11 million in the first quarter of 2016, the same as the first quarter of 2015.
MasterCard’s effective tax rate was 28.3% in the first quarter of 2016, versus a rate of 23.9% in the comparable period in 2015. The increase was primarily due to the non-recurrence of a discrete U.S. foreign tax credit benefit which occurred in the first quarter of 2015.
During the first quarter of 2016, MasterCard repurchased approximately 15 million shares of Class A common stock at a cost of almost $1.4 billion. Quarter-to-date through April 21st, the company repurchased an additional 3.0 million shares at a cost of $288 million, with $2.9 billion remaining under current repurchase program authorizations. (Original Source)
Shares of Mastercard closed yesterday at $98.38, up $1.11 or 1.14%. 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 $93.58 and its 200-day moving average is $93.37.
On the ratings front, Mastercard has been the subject of a number of recent research reports. In a report issued on April 25, Credit Suisse analyst Moshe Orenbuch maintained a Buy rating on MA, with a price target of $108, which implies an upside of 9.8% from current levels. Separately, on April 19, Oppenheimer’s Glenn Greene reiterated a Buy rating on the stock and has a price target of $102.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Moshe Orenbuch and Glenn Greene have a total average return of 6.2% and 21.4% respectively. Orenbuch has a success rate of 66.0% and is ranked #694 out of 3839 analysts, while Greene has a success rate of 82.3% and is ranked #2.
The street is mostly Bullish on MA stock. Out of 10 analysts who cover the stock, 7 suggest a Buy rating and 3 recommend to Hold the stock. The 12-month average price target assigned to the stock is $103.33, which implies an upside of 5.0% from current levels.