- Mastercard posted impressive Q3 results, beating analysts’ earnings estimates and meeting revenue expectations.
- Net revenue for the quarter totaled $6.5 billion, up 14% year-over-year. Operating income increased by 24% to $3.8 billion, with the related margin expanding by 4.8 percentage points to 58.8%. Adjusted EPS increased by 24% year-over-year to $3.39, beating estimates of $3.21.
- During the quarter, Mastercard repurchased 4.8 million shares for $1.9 billion and paid $538 million in dividends.
- The company’s robust performance was driven by an increase in gross dollar volume and cross-border volume, with the former up 11% and the latter up 21%, driven by the continued recovery of travel.
- Looking ahead to Q4, Mastercard expects revenue to grow at the low end of double digits, with macroeconomic headwinds and geopolitical tensions providing challenges.
- Mastercard is a well-established business with operating margins of more than 50% and returns on invested capital that have consistently remained above 25%. These factors have allowed Mastercard to comfortably outperform the S&P 500, with the company generating a CAGR of 30% since its listing in 2006, versus 9.2% for the S&P 500.
- Despite facing regulatory risks and potential competition from fintech companies, and developing government payment networks, we believe there is still significant scope for growth for Mastercard as the world continues to transition away from cash payments. Mastercard is one of a few businesses that should offer relative protection from the current elevated inflationary environment as well as a potential recession. We hold Mastercard in client portfolios as well as the Cratos BCI Worldwide Flexible Fund.
By Desmond Esakov
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