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Mastercard's (MA) Q2 Earnings Beat on Solid Cross-Border Volume

·5-min read

Mastercard Incorporated MA reported second-quarter 2022 adjusted earnings of $2.56 per share, which beat the Zacks Consensus Estimate by 8.5%. The bottom line climbed 31% year over year.

Net revenues of this leading technology company in the global payments industry improved 21% year over year to $5.5 billion in the quarter under review. The top line outpaced the consensus mark by 4.3%.

Shares of Mastercard gained 1.7% in the pre-market trading session, courtesy of its better-than-expected second-quarter results.

The quarterly results were driven by improved consumer spending, solid cross-border volume growth, higher gross dollar volume (GDV) and increased switched transactions. However, the upside was partly offset by elevated operating expenses.

Mastercard Incorporated Price, Consensus and EPS Surprise

Mastercard Incorporated Price, Consensus and EPS Surprise
Mastercard Incorporated Price, Consensus and EPS Surprise

Mastercard Incorporated price-consensus-eps-surprise-chart | Mastercard Incorporated Quote

Q2 Operational Performance

GDV (representing the aggregated dollar amount of purchases made and cash disbursements obtained from MasterCard-branded cards) rose 14% year over year on a local-currency basis to $2.1 trillion in the second quarter.

Cross-border volumes (a key measure that tracks spending on cards beyond the issuing country) surged 58% year over year on a local-currency basis.

Switched transactions, which indicate the number of times a company’s products are used to facilitate transactions, advanced 12% year over year to 30.4 billion.

Other revenues climbed 18% year over year in the quarter under review, which included a 3% increase from acquisitions. The remaining growth stemmed from Cyber & Intelligence and Data & Services solutions.

Rebates and incentives escalated 19% year over year in the second quarter.

MA’s clients issued 3 billion Mastercard and Maestro-branded cards as of Jun 30, 2022.

Operating expenses of $2.5 billion increased 13% year over year, primarily due to a rise in general and administrative coupled with depreciation and amortization expenses.

Operating income advanced 29% year over year to $3 billion in the quarter under review. Adjusted operating margin of 57.9% improved 470 basis points (bps) year over year.

Balance Sheet (As of Jun 30, 2022)

Mastercard exited the second quarter with total assets of $36.2 billion, which declined 3.8% from the figure at 2021 end.

Cash and cash equivalents of $5.9 billion plunged 20.2% from the 2021-end level. Nevertheless, the figure is way above the current portion of long-term debt ($735 million).

Long-term debt amounted to $13.7 billion, up 4.9% from the figure as of Dec 31, 2021.

Total equity fell 15.5% from the 2021-end level to $6.2 billion.

Cash Flows

Net cash provided by operating activities totaled $4.2 billion during the six months ended Jun 30, 2022, which climbed 13.6% from the prior-year comparable period.

Share Repurchase and Dividend Payout

During the second quarter, Mastercard bought back 6.9 million shares for $2.4 billion. As of Jul 25, 2022, it had $6.7 billion remaining under its authorized share buyback programs.

Simultaneously, MA paid out dividends worth $477 million in the quarter under review.

3Q22 View

In the third quarter, management anticipates both net revenues and operating expenses to witness high-end of low-double digits growth on a year-over-year basis.

2022 Outlook Revised

Management updated the full-year outlook with respect to net revenues. Net revenues are projected to register low-end of high-teens growth when compared with the 2021 figure, while the earlier guidance called for the metric to witness high-end of mid-teens growth.

Meanwhile, Mastercard reiterated the 2022 guidance for operating expenses, wherein it is anticipated to see low-end of low double-digit growth from the 2021 figure.

Zacks Rank

Mastercard currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Business Services Sector Releases

Of the Business Services sector players that have already released second-quarter results so far, the bottom line of Equifax Inc. EFX, Robert Half International Inc. RHI and Fiserv, Inc. FISV beat the Zacks Consensus Estimate.

Equifax reported adjusted earnings (excluding 46 cents from non-recurring items) of $2.09 per share, which beat the Zacks Consensus Estimate by 3% and improved 5.6% on a year-over-year basis. However, EFX’s revenues of $1.32 billion missed the consensus estimates marginally but improved 6.6% year over year on a reported basis and 8% on a local-currency basis. Adjusted EBITDA of Equifax in the second quarter of 2022 was $461.3 million, up 7% from the year-ago quarter’s level.

Robert Half’s quarterly earnings of $1.6 per share beat the consensus mark by 0.6% and improved 20.3% year over year. RHI’s revenues of $1.86 billion missed the consensus mark by 1.8% but increased 17.9% year over year on a reported basis and 20% on an as-adjusted basis. Adjusted gross profit of Robert Half in the quarter was $804.1 million, up 20.2% year over year.

Fiserv reported adjusted earnings (excluding 64 cents from non-recurring items) per share of $1.56, which beat the consensus mark by 1.3% and increased 14% year over year. FISV’s adjusted revenues of $4.23 billion beat the consensus estimate by 4.1% and increased 4.5% year over year. Organic revenue growth of Fiserv was 12% in the quarter, driven by a 17% surge in the Acceptance segment, a 7% increase in the Fintech segment and an 8% improvement in the Payments segment.

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