Check out the latest Mastercard earnings call transcript.
The payment processing space has seen a huge amount of innovation lately, and at first glance, you might think a company like credit-card giant Mastercard (MA +0.23%) would be at risk of being left behind. In a world in which having a plastic card to carry around with you seems increasingly quaint, more and more customers want to be able to use mobile devices to manage their finances. Yet Mastercard was smart in anticipating the move toward technological innovation in the payment space, and it's tapped into that side of the industry to produce impressive growth and competitive victories.
Coming into Thursday's fourth-quarter financial report, Mastercard investors fully expected the company to keep up its positive momentum. Mastercard's results confirmed that growth trajectory, and 2019 looks like another potentially great year for the company if it can keep executing on its business strategies as well as it has.
Image source: Mastercard.
Mastercard celebrates the holiday
Mastercard's fourth-quarter results showed no signs of a slowdown for the payment processor. Net revenue of $3.81 billion was up 15% from the year-ago quarter, matching what most of those following the stock had expected to see. Adjusted net income soared 33% to $1.61 billion, and that worked out to adjusted earnings of $1.55 per share, beating the consensus forecast for $1.53 per share.
Just about all of Mastercard's primary metrics kept growing at a pace similar to what the company has achieved in the past. Gross dollar volume was higher by 14% in local-currency terms to $1.55 trillion, maintaining a nearly even split between its credit and debit card products. The number of switched transactions Mastercard made climbed to 20.1 billion, rising 17% after adjusting for calendar effects and the deconsolidation of the company's business in Venezuela. Cross-border volume rose by 17% in local currency, and Mastercard had issued about 2.52 billion cards under its own brand as well as the Maestro name, which is about 110 million more than it had outstanding 12 months ago.
Extraordinary items related to litigation caused Mastercard's operating expense to balloon during the quarter, but after adjusting for those items, the company kept its costs in check. Adjusted operating expenses were up 12%, with Mastercard saying the added amounts went toward investments in strategic initiatives.
Performance across Mastercard's global markets was fairly evenly distributed. U.S. growth in gross dollar volume pushed forward into double-digit percentages, rising 10.2% from year-earlier levels. Local-currency growth in international markets jumped 16%, but seven percentage points of adverse currency impacts brought the U.S. dollar-denominated growth figure internationally down to just 9.1%.
What's next for Mastercard?
CEO Ajay Banga was quite pleased with Mastercard's performance. "These results reflect strong execution in growing our core business and driving new capabilities to improve the customer experience and enhance security across all transaction types," Banga said. "When you combine this with the strategic investments we've made for the long term, we are very well positioned for continued growth."
Buyback activity has also continued at ambitious levels. During the fourth quarter, Mastercard bought back about 4.4 million shares, paying $888 million for them. Moreover, just during the month of January, the card giant has spent another $773 million to repurchase an additional 4 million shares. Yet as large as those buys are, Mastercard still has fully $6 billion left to spend on repurchase authorization programs if it so chooses.
Mastercard investors were quite pleased with how the card company fared, and the stock climbed more than 4% in pre-market trading following the announcement. With so many growth opportunities ahead of it, Mastercard looks like it's in a great position not just to sustain its legacy businesses, but to continue pushing forward and coming out with innovative new payment solutions that will keep customers coming back for more.
