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MasterCard Lays Strong Foundation for 2016: A Growth Story

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MasterCard’s growth story

MasterCard (MA) reported EPS (earnings per share) of $0.86 in the March quarter, beating Wall Street analyst estimates of $0.85. For 2016, MasterCard is expected to earn $3.54 per share. The company reported net income of $959 million, a decline of 6% on a year-over-year basis. On a currency adjusted basis, net income declined by 2%, reflecting a negative impact of a strong dollar. The earnings were unfavorably impacted by $0.08. This was due to the non-recurrence of a discrete tax credit and a balance sheet remeasurement related to Venezuela in the first quarter of 2015.

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MasterCard is forming partnerships with companies such as Apple (AAPL) to take advantage of the increasing use of mobile phones to make credit card payments. But the company’s performance is suffering from a strong US dollar. The dollar is expected to strengthen as the Fed targets further rate hikes. MasterCard’s revenues in the first quarter of 2016 increased by 10% to $2.4 billion. Expenses rose by 25% to $1.1 billion.

In a press release on April 28, 2016, MasterCard president and CEO (chief executive officer) Ajay Banga said, “The year is off to a good start with solid growth in revenue due to strong volume and transaction levels this quarter.” Banga went on to say, “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.”

Here’s how some of MasterCard’s peers in the payment processing industry fared with their quarterly earnings:

  • Visa (V) – beat estimates
  • American Express (AXP) – beat estimates
  • Fidelity National Information Services (FIS) – beat estimates

Together, these companies account for 2.3% of the Technology Select Sector SPDR ETF (XLK).

Financial services

MasterCard is a technology company in the global payments industry. The company operates the world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments, and businesses in more than 210 countries and territories.

MasterCard focuses on segments, including government programs such as Social Security payments, unemployment benefits, and commercial programs such as payroll, health savings accounts, and employee benefits.

In this series, we’ll look at MasterCard’s dollar volumes, processed transactions, card sales, balance sheet strength, strategic initiatives, dividends, and valuations. Let’s start with MasterCard’s dollar volumes.

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