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MasterCard Riding High on Acquisitions, Organic Growth

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Sep. 16 2016, Published 8:02 p.m. ET

MasterCard’s strong performance

MasterCard (MA) is expected to post EPS (earnings per share) of $0.97 in 3Q16, reflecting its business model and organic growth. For 2016, MasterCard is expected to earn $3.53 per share.

The company reported EPS of $0.96 in 2Q16, beating Wall Street analysts’ estimates of $0.90. The company reported net income of $983 million, a rise of 7% on a year-over-year basis.

On a currency adjusted basis, MA’s net income rose 8%, reflecting the negative impact of a strong dollar. The net income incorporated special items related to separate UK merchant litigation. Excluding the litigation, the company’s net income rose to $1.1 billion.

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VocaLink

MasterCard announced the acquisition of VocaLink in August 2016 for 700 million pounds sterling. VocaLink offers payment technology platforms in the UK. The company manages real-time fast payments used in Internet, telephone banking, and communications in ATM machines. It processes more than 90% of salary payments and 70% of household bills in the UK.

In a press release on July 28, 2016, MasterCard’s president and CEO, Ajay Banga, noted, “We carried solid momentum into the second quarter, delivering 14 percent revenue growth for the first half of the year, after adjusting for currency. 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.”

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 (MA) is a technology company in the global payments industry. The company operates the world’s fastest payment processing network, which allows it to connect to consumers, financial institutions, merchants, governments, and businesses in more than 210 countries and territories.

MasterCard focuses on segments that include 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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