MasterCard Q4 Earnings Beat Estimates
FSM News | Feb 01, 2017 08:04AM ET
Financial services company Mastercard Inc (NYSE:MA) posted its fourth quarter and full year 2016 earnings report with profits beating forecast and promising revenue growth. However, the revenue growth that missed forecasts took a toll on the company’s stock price in the market.
MasterCard Incorporated released its fourth quarter and full year fiscal 2016 financial earnings report, joining several other earnings reports released by other well-known international financial institutions during the first month of 2017.
The report was posted on MasterCard’s official website, while a conference call was also held publicly for both executives and analysts to discuss the results published.
“Our business continues to perform well. We’re very pleased to have delivered a strong result for the year driven by solid execution of our strategy and leveraging our differentiated service offerings,” stated Ajay Banga, MasterCard president and CEO.
Fourth Quarter and Full Year Earnings
For the fourth quarter of 2016, MasterCard saw an increase of 5%, generating a total of $933 million of net income, while the diluted earnings per share was at $0.86, or 9% higher from the year-ago same period data. Excluding a special item, MasterCard’s Q4 net income was at $940 million, or $0.86 per diluted share, up by 6% compared with the Q4 2015 report.
The 86 cents per diluted share increase has beaten analyst Zacks Consensus Estimate of 85 cents.
Meanwhile, the net revenue for the quarter was at $2.76 billion, up by 9.5% from the year ago growth of $2.52 billion. Despite the increase, the revenue growth for the quarter still missed analyst forecast of $2.78 billion.
The growth seen in revenue was mainly driven by a 17% increase in number of switched transactions to 15.2 billion, a boost of 13% in the cross-border volumes, and a 9% climb in gross dollar volume from an impact of recent EU regulatory changes, to $1.2 trillion.
Overall operating expenses declined by 1% to $1.4 billion in the fourth quarter.
For the full year fiscal 2016, the company’s net income was 7% higher by $4.1 billion, with $3.69 earnings per diluted share or 10% climb from the year-ago period of $3.35 EPS. The full year net revenue was $10.8 billion, or 11% higher compared to 2015 results of $9.66 billion.
Meanwhile the total operating expenses were $5 billion, with an increase of 9%. The higher expenses were driven from a continued investment actions of MasterCard executed in order to support the company’s strategic initiatives, higher data processing fees, and lapping some favorable impact on foreign exchange from 2015.
Stock Performance
Despite the release of promising earnings growth from MasterCard, the company’s stock in the New York Stock Exchange still plunged during the trading session day of the report’s release. The stock opened at $105.97 on Tuesday, and reached a high of $107.10, but plunged to a low of $105.50 before closing at $106.33, gapped by 2.72% from the previous trading session close of $109.30.
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The stock was close to a $3 decline following the release of the missed forecast revenue. Its market capitalization was at $115.86 billion. For a 12-month period, MasterCard stock grew almost 23%.
Based on the stock’s movement after the release of the earnings report, investors’ initial reaction indicated that the particular growth and missed revenue forecast was not in their favor.
MasterCard’s Future
During MasterCard’s conference call, Banga mentioned the company’s repurchase of 11 million shares worth $1.1 billion.
Meanwhile, the chief executive tackled on the company’s future position given the possible impacts it might get with new policy proposals, especially with a new administration under US President Donald Trump. Still, the company still expressed optimism over high consumer confidence and other factors.
Europe, Asia, and Australian regions were also included as a weigh on the company’s stand in those places. Banga said that they are “to continue to focus on executing our strategy and growing our business. We are seeing double-digit volume and transaction growth across most of our markets, but continue doing deals be leveraging our service offerings.
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