Mastercard Incorporated (MA), a leading provider of payment processing products and services, delivered outstanding financial results for the first quarter of 2024. The company reported a double-digit year-over-year growth in net revenue to $6.35 billion. That also beat the analyst expectations of $6.34 billion.

Furthermore, Mastercard posted a first-quarter adjusted EPS of $3.31, surpassing the analysts’ estimate of $3.24. Also, during the quarter, the company repurchased 4.4 million shares at a cost of $2 billion and paid around $6.6 million in dividends. It reflects MA’s commitment to return capital to shareholders.

Michael Miebach, CEO of Mastercard, said, “Our momentum continued this quarter, as we delivered strong revenue and earnings growth powered by healthy consumer spending, strong cross-border volume growth of 18% year-over-year, and new deal wins in every region.”

“We are driving growth in electronic payments by scaling innovative technologies like tokenization. That’s why people choose Mastercard - for a simple, seamless and secure way to pay,” Miebach added.

The Commerce Department report stated that consumer spending, which accounts for over two-thirds of the nation’s economic activity, rose 0.2% in May after surging 0.1% in April. Payment processors such as Mastercard usually experience a surge in transaction volumes when consumer spending increases.

Shares of MA have gained 3.7% over the past six months and 2.6% year-to-date to close the last trading session at $437.61. Also, the stock has surged 11.1% over the past year.

Let’s look at factors that could influence MA’s performance in the upcoming months.

Positive Recent Developments

On June 3, 2024, MA launched its global Biometric Checkout Program in Latin America (LAC). With partners Ingenico, Fulcrum Biometrics, Fujitsu Frontech, and Scanntech, Mastercard expanded an innovative checkout experience at Tienda Inglesa’s Red Expres in Uruguay. This new launch is expected to boost the company’s revenue streams and extend market reach.

In March, Mastercard introduced Smart Subscriptions, an open-banking-powered subscriptions management solution that financial institutions can easily plug into their consumer banking applications. It leverages Mastercard’s Subscriptions Control solution introduced in 2023. This streamlined solution offers more transparency in financial wellness.

Solid Financial Performance

For the first quarter that ended March 31, 2024, MA reported a net revenue of $6.35 billion, an increase of 11% over the prior year’s quarter. Its operating income rose 16.1% year-over-year to $3.60 billion. Also, its adjusted net income and adjusted EPS came in at $3.10 billion and $3.31, up 14.8% and 18.2% year-over-year, respectively.

Furthermore, as of March 31, 2024, the company’s cash and cash equivalents were $7.29 billion, and its total assets stood at $42.60 billion.

Favorable Analyst Expectations

Analysts expect MA’s revenue for the second quarter (ended June 2024) to grow 9.3% year-over-year to $6.85 billion. The consensus EPS estimate of $3.51 for the same period indicates a 21.5% year-over-year increase. Also, the company has surpassed consensus revenue and EPS estimates in all four trailing quarters, which is impressive.

For the fiscal year ending December 2024, Street expects MA’s revenue and EPS to grow 10.9% and 16.4% from the prior year to $27.83 billion and $14.27, respectively. In addition, the company’s revenue and EPS for the fiscal year 2025 are expected to increase 12.4% and 16.2% year-over-year to $31.28 billion and $16.58, respectively.

Accelerating Profitability

ELV’s trailing-12-month gross profit margin of 100% is 67.1% higher than the 59.9% industry average. Similarly, its trailing-12-month EBITDA margin of 61.30% is 168.1% higher than the industry average of 22.86%. Further, the stock’s trailing-12-month net income margin of 46.09% is 98.1% higher than the industry average of 23.20%.

Moreover, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 188.42%, 42.50%, and 27.80% are considerably higher than the industry averages of 10.60%, 6.88%, and 1.06%, respectively. Its trailing-12-month levered FCF margin of 43.02% is 143.6% higher than the industry average of 17.66%.

POWR Ratings Show Promise

MA’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. MA has a B grade for Quality, consistent with its higher-than-industry profitability. It has a B grade for Sentiment, consistent with its optimistic analyst estimates.

MA is ranked #5 out of 44 stocks in the B-rated Consumer Financial Services industry.

Click here to access MA grades for Growth, Value, Stability, and Momentum.

Bottom Line

Mastercard is a leader in the payments processing industry and holds significant market power globally. The payments processing solutions market is expected to reach $227.19 billion in 2028, growing at a CAGR of 16.9%. A rapid surge in internet penetration, rising e-commerce sales, and technological advancements will propel the market growth.

After delivering solid first-quarter revenue and earnings growth powered by healthy consumer spending and new deal wins, MA is well-positioned to continue the business momentum in the upcoming quarters, driven by robust demand for its product offerings, strategic initiatives, and global expansion.

Considering MA’s robust fundamentals and rosy long-term growth prospects, investing in this stock could be a wise decision.

How Does Mastercard Incorporated (MA) Stack Up Against Its Peers?

While MA has an overall grade of B, equating to a Buy rating, you may also check out these other A-rated (Strong Buy) stocks within the Consumer Financial Services industry: 360 Finance, Inc. (QFIN), Atlanticus Holdings Corporation (ATLC), and Regional Management Corp. (RM).

To explore more A and B-rated financial services stocks, click here.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >

MA shares fell $1.61 (-0.37%) in premarket trading Tuesday. Year-to-date, MA has gained 2.53%, versus a 14.98% rise in the benchmark S&P 500 index during the same period.

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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