Mastercard Profit Rises in the Third Quarter as Revenue Climbs 14 Percent

Mastercard posted a higher third quarter profit on Thursday, beating analyst estimates on both earnings and revenue as consumer spending stayed resilient. Adjusted earnings per share were 5.31 dollars for the quarter ended September 30, compared with analyst estimates of 5.17 dollars according to FactSet, and revenue climbed 14 percent to 9.81 billion dollars, compared with estimates of 9.66 billion dollars.

On a GAAP basis, third quarter profit was 4.63 billion dollars, or 5.28 dollars a share, compared with 3.93 billion dollars, or 4.34 dollars a share, a year earlier. Net income rose 18 percent and diluted earnings per share rose 22 percent. Adjusted net income rose 17 percent to 4.653 billion dollars, and adjusted earnings per share climbed 21 percent from 4.38 dollars a year earlier. Revenue a year earlier was 8.602 billion dollars, and revenue growth was 14 percent on both a reported and a currency neutral basis.

Payment network and services

Payment network net revenue rose 11 percent to 5.749 billion dollars. The company said the growth was driven by gross dollar volume, cross border volume and switched transactions, as well as higher prices. Payment network rebates and incentives increased in the quarter.

Value added services and solutions revenue grew 19 percent to 4.058 billion dollars. That segment includes fraud prevention, security, digital authentication, consumer engagement and data analytics.

Gross dollar volume grew 7 percent to approximately 3 trillion dollars. Purchase volume increased 9 percent, cross border volume increased 11 percent in local currency, and cross border assessments grew 16 percent to 3.841 billion dollars. Switched transactions totalled 49.3 billion in the quarter.

Margins, costs and returns

Adjusted operating income increased 15 percent to 5.935 billion dollars, and the adjusted operating margin was 60.5 percent, up from 59.8 percent a year earlier. Adjusted operating expenses grew 12 percent to 3.872 billion dollars. Customer rebates and incentives rose 18 percent to 6.369 billion dollars. Diluted weighted average shares were 876 million, down from 905 million a year earlier.

Mastercard repurchased 5.3 million shares for 3 billion dollars during the quarter and paid 763 million dollars in dividends. About 4.9 billion dollars remained under its share repurchase authorization at the end of the quarter. Through October 26, the company bought back another 1.1 million shares for approximately 648 million dollars after the quarter ended.

Mastercard shares rose in premarket trading after the report. The Wall Street Journal put the shares up 3.2 percent to 629.55 dollars, while MarketSpeaker put them up about 3 percent to 628.49 dollars at 8:19 a.m. Eastern time on October 29.