Mastercard Incorporated (NYSE:MA) has outperformed market expectations in its fourth-quarter 2023 earnings report, revealing adjusted earnings of $3.18 per share, surpassing the Zacks Consensus Estimate by 3.3%. This marked a substantial 20% increase in the bottom line compared to the same period the previous year.
The global payments industry leader reported net revenues of $6.5 billion for the quarter, reflecting a notable 13% year-over-year improvement and surpassing the consensus mark by 1.4%. The robust quarterly results were driven by resilient consumer spending and strong cross-border volumes. Additionally, an expanding payment network and the provision of value-added services and solutions contributed to the positive outcome, although the impact was partially offset by an uptick in operating expenses.
Q4 Operational Highlights
Gross dollar volume, representing the total value of purchases and cash disbursements from Mastercard-branded cards, witnessed a 10% local-currency increase to $2.4 trillion in the fourth quarter, closely aligning with both the Zacks Consensus Estimate and our projection of $2.3 trillion.
Cross-border volumes, a crucial metric tracking card spending beyond the issuing country, experienced an 18% local currency-based growth. Switched transactions, indicating product usage for facilitating transactions, reached 38.1 billion, growing by 12% year over year and surpassing the consensus mark of 37.6 billion.
Value-added services and solutions net revenues reached $2.7 billion, showcasing a robust 19% year-over-year increase, exceeding the Zacks Consensus Estimate of $2.5 billion and our projected $2.4 billion. This growth was attributed to the strength in cyber and intelligence solutions, coupled with improvements in consulting, marketing, data analytics, and loyalty solutions.
Payment network rebates and incentives surged by 19% year over year in Q4 due to new and renewed deals. Mastercard’s clients had issued a total of 3.3 billion Mastercard and Maestro-branded cards as of December 31, 2023.
Operating expenses rose to $3.2 billion, marking a 21% year-over-year increase, primarily driven by elevated personnel costs, exceeding our estimate of $2.9 billion.
Mastercard’s operating income increased by 6% year over year to $3.4 billion but fell short of our estimate of $3.6 billion. The operating margin for the quarter under review improved by 320 basis points to 51.5%.
Balance Sheet and Financials (as of Dec 31, 2023)
Mastercard concluded the fourth quarter with $8.6 billion in cash and cash equivalents, reflecting a 22.5% increase from the 2022 year-end level. This amount significantly surpassed the current portion of long-term debt, which stood at $1.3 billion.
Total assets grew by 9.6% to reach $42.4 billion compared to the figure at the end of 2022. Long-term debt amounted to $14.3 billion, a 4.3% increase from the previous year-end figure.
Total equity showed a healthy improvement of 9.7%, reaching $7 billion compared to the end of 2022.
Strong Cash Flows and Capital Deployment
Mastercard demonstrated robust cash flows from operations, recording $12 billion in 2023, a 7% increase from the 2022 figure.
In the fourth quarter, the company executed a share buyback, repurchasing 4.5 million shares for $1.8 billion. As of January 26, 2024, Mastercard retains a remaining buyback capacity of $13.6 billion. Dividends paid out in the quarter amounted to $534 million.
1Q24 Guidance and Outlook for 2024
For the first quarter of 2024, management anticipates net revenues to exhibit low-end, low-double-digit growth on a year-over-year basis, while GAAP operating expenses are expected to record minimal year-over-year growth.
Looking ahead to the full year 2024, management forecasts net revenue growth at the high-end of low-double-digit figures from the 2023 reported figure of $25.1 billion. GAAP operating expenses are estimated to increase in the mid-single-digit range from the 2023 figure of $11.1 billion.
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