Earnings Preview : MasterCard Incorporated (NYSE: MA) First Quarter 2010
Monday, May 03, 2022 9:46 AM

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MasterCard Incorporated (NYSE: MA) is scheduled to report its Q1 2010 results after the market closes on May 3, 2010. Recent currency trends and reported bank card volume, in addition to better cross-border and lower GandA spend is expected to positively surprise earnings this quarter. However, most growth metrics are expected to underperform Visa's. Rebates will continue to garner increased attention but should be less controversial this quarter. Volume trends and recent pricing initiatives, which do not appear fully reflected in Street estimates, will drive post-quarter estimates higher.
 
MasterCard Incorporated (MasterCard) is a payment solutions company that provides a variety of services in support of the credit, debit and related payment programs of approximately 23,000 financial institutions and other entities that are its customers. Through its three-tiered business model as franchisor, processor and advisor, the Company develops and markets payment solutions, process payment transactions, and provides support services to its customers and, depending upon the service, to merchants and other clients. MasterCard manages a family of payment card brands, including MasterCard, MasterCard Electronic, Maestro and Cirrus, which the Company licenses to its customers. In December 2008, MasterCard acquired Orbiscom Ltd.

As for Q4 2009, the company reported Q4 net income of $294 million, or $2.24 per diluted share, including an after-tax severance charge of $0.19 per diluted share. Net revenue for the Q4 of 2009 was $1.3 billion, a 6.0% increase versus the same period in 2008. Currency fluctuations (driven by the movement of the euro and the Brazilian real relative to the U.S. dollar) contributed 3.8 percentage points of the increase in net revenue for the quarter. The higher net revenue in the Q4 this year benefited from: (1) Pricing changes of approximately 5 percentage points, (2) An increase in cross-border volumes of 3.9%, (3) A 6.7% increase in the number of transactions processed, to 5.9 billion, and  (4) Growth of 5.3% in MasterCard's gross dollar volume, on a local currency basis, to $674 billion. Worldwide purchase volume during the quarter rose 5.7% on a local currency basis, versus the Q4 of 2008, to $510 billion. As of December 31, 2009, the company's customers had issued 966 million MasterCard cards, a decline of 1.3% over the cards issued at December 31, 2008.The operating margin was 36.1% for the Q4 of 2009. Total other expense was $10 million in the Q4 of 2009 versus total other expense of $17 million in the Q4 of 2008. The decrease was primarily due to lower interest expense of $13 million related to litigation settlements versus the comparable period in 2008.
 
Analysts' estimates for Q1 2010 range from a low of $2.82 to a high of $3.40, compared to a consensus estimate of $3.12, with number of estimates being 26 and the co-efficient variance 3.80. Q1 2010 EPS is expected to roll in at $3.10, with Q1 revenues of $1.279bn (Street at $1.267bn), up 11% YoY, marking the first double-digit revennue increase since Q1 2009. Local currency and reported GDV growth of 6% and 12%, respectively, is expected, versus 5% and 11% last quarter. Processed transaction growth of 6% is likely, which is flat to last quarter, assuming minimal WaMu loss. U.S. purchase volume is expected to be flat to the prior-year period (Credit -5%, Debit +8%) and cross-border volume growth of 5% is likely. GandA assumption is flat to the prior-year period at $446mm, which could prove conservative as Q1 2009 included ~$19mm in severance charges. Personnel expense, which accounts for 70% of GandA spend, could be a positive surprise. Employee headcount was down 8% from the prior-year period (or ~400 employees) as of December '09. Every 1% change in personnel spends is worth ~$0.02 and ~$0.07 in quarterly and annual EPS, respectively. Retail sales growth is accelerating. C1Q10 nonadjusted retail and food comps, which are the best proxy for V/MA domestic purchase volume trends, accelerated three points sequentially to 5% YoY. Similarly, Q1 bank card volume growth trends (for most large issuers) showed sequential improvement. Recently implemented pricing initiatives (e.g., US x-border and domestic acquiring) could be worth ~$200mm in annualized gross revenues, which is only partially contemplated in FY10 Street estimates.
 
The stock closed $248.04, down 2.87% on April 30, 2022 and most analysts' recommend buying this stock with an average price target of $300.00.
 

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