Mastercard Earnings: Growth Ticks Up a Bit

Mastercard has some macro tailwinds, but we don’t see anything in recent results that alters our long-term expectations.

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Key Morningstar Metrics for MasterCard

Mastercard MA saw growth accelerate modestly in the third quarter, as consumer spending appears to be holding strong.

Why it matters: Net revenue grew 14% year over year on a constant-currency basis, up from 12% in the previous quarter.

Purchase volume grew 8.9% year over year on a constant-currency basis, and purchase transactions were up 9.3%. Both metrics were roughly in line with recent quarters. These results, together with what we saw from Visa, suggest that consumer spending remains strong.
Value-added services continue to provide an additional boost, with revenue in this segment up 19%. Additionally, like Visa, Mastercard saw a modest boost in cross-border volume (excluding intra-Europe transactions), with volume up 12% year over year on a constant-currency basis as travel spending appears to be picking up.

The bottom line: We will maintain our $550 fair value estimate for the wide-moat company and see the shares as modestly overvalued.

Mastercard has some macro tailwinds at the moment, and while these will likely persist in the near term, we don’t see anything in recent results that alters our long-term expectations.
Better growth appears to be providing a modest uplift to margins, with adjusted margins up 70 basis points compared with last year. However, client incentive growth in the quarter was relatively high at 18%.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.