MasterCard Inc. (MA - Analyst Report) reported third-quarter 2014 operating earnings per share (EPS) of 87 cents. The results comfortably exceeded both the Zacks Consensus Estimate of 78 cents and the year-ago quarter figure of 73 cents. With this result, the company’s average four-quarter beat stands at 0.4%. EPS had an adverse impact of 2 cents due to acquisitions in the reported quarter.
Operating net income jumped 15.5% year over year to $1.02 billion. No special items were recorded during the comparable periods.
MasterCard witnessed an increased number of processed transactions and strong gross dollar value (GDV) growth during the reported quarter. These were partially offset by higher operating expenses. While operating margin improved slightly, cash flows remained weak.
Net revenue grew 12.8% year over year and 13% on a constant currency basis to $2.5 billion, and breezed past the Zacks Consensus Estimate of $2.44 billion. Acquisitions accounted of 3% of total revenue growth. The upside was primarily due to a 10% rise in the number of processed transactions to 11 billion along with 15% increase in cross-border volumes. These were partially offset by higher rebates and incentives, primarily attributable to new and renewed business alliances.
During the reported quarter, GDV increased 12% to $1.2 trillion, while worldwide purchase volume rose 11% year over year, on a constant currency basis, to $843 billion. As of Sep 30, 2014, MasterCard had issued over 2.1 billion MasterCard-and Maestro-branded cards.
Total operating expenses rose 11.6% year over year to $1.08 billion. The overall increase primarily resulted from a surge of 29.7% in depreciation and amortization expenses and 13.7% uptick in general and administrative expenses. These were partially offset by flattish advertising and marketing expenses.
Subsequently, operating income increased 13.8% year over year to $1.42 billion in the reported quarter. Operating margin improved slightly to 56.7% from 56.3% in the year-ago quarter. Additionally, interest expense rose to $11 million against income of $3 million. MasterCard’s effective tax rate was 28.5%, lower than 29.9% in the year-ago period.
