Mastercard earnings beat on top and bottom lines

Key Points
  • Mastercard beat earnings expectations on the top and bottom lines.
  • The company reported earnings of $2.15 per share, adjusted, compare with $2.01 expected.
  • Gross dollar volume came in at $1.7 trillion, up 14% from the year-earlier period.
A woman walks past a Westpac bank advertisement in central Sydney, Australia.
Daniel Munoz | Reuters

Mastercard reported third-quarter earnings on Tuesday that beat analysts' expectations on the top and bottom lines.

Shares of Mastercard were up 1% in premarket trading.

Here's what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $2.15 adjusted, vs. $2.01 expected
  • Revenue: $4.47 billion, vs. $4.42 billion expected

Gross dollar volume, the dollar value of all transactions processed, came in at $1.7 trillion — 14% higher than the year-earlier period when the company reported gross dollar volume of $1.5 trillion. Domestic dollar volume increased to $494 billion from $442 billion during the third quarter of 2018, almost a 12% increase.

The strong volume growth comes despite weak U.S. consumer data in September. U.S. retail sales missed economists' projections and dropped 0.3% in September, the first decline in seven months. Consumer confidence data also missed expectations for September, coming in at 125.1 as compared with the 133 estimated.

Mastercard's business in Europe also came in strong during the third quarter, with gross dollar volume for the region of $507 billion, up 16% from the year earlier period.

Net revenue increased 15% from the third quarter of 2018 not only due to an increase in gross dollar volume, but also an increase in switched transactions and cross-border volumes.

"We have recently expanded several key customer relationships, announced our Mastercard Track suite of B2B solutions and launched the faster, more secure click-to-pay online checkout experience," CEO Ajay Banga said in a statement about the earnings beat.

The credit-card company noted that total operating expenses increased 16% from the year-earlier period due to acquisitions and ongoing investments. These investment expenses, however, came in lower than what the company expected, and it anticipates those expenses to now be incurred during the fourth quarter.

Mastercard is investing to grow its cyber security, loyalty and rewards as well as expanding its relationship with partners such as Citi, Bank of America and HSBC.

In the third quarter of 2018, Mastercard reported third-quarter adjusted net income of $1.90 billion, or $1.78 per adjusted share, and net revenue of $3.9 billion.

According to FactSet, 30 analysts have a buy or overweight rating on shares of Mastercard as of Tuesday morning. The average target price of all analysts surveyed by FactSet is $309.47.