MasterCard Earnings: EPS Beat Despite a Strong Dollar

MasterCard started out 2015 in encouraging fashion, posting first-quarter earnings Wednesday that well exceeded analyst estimates. Here's a quick peek at the big credit card processor's numbers.

Enhanced EPSMasterCard generated $2.23 billion in quarterly revenue, 3% higher than in the same period of 2014. That didn't quite hit the average analyst estimate of $2.28 billion.

But that narrow miss was more than offset by a thumping earnings beat -- net income was just over $1 billion, or 17% better than the year-ago period. This shook out to $0.89 per share, against the market's anticipation of $0.80.

This was on the back of a healthy 12% rise in processed transactions, which came in at $11 billion.

Modest cost savings helped juice the bottom line. Total operating expenses declined slightly on a year-over-year basis (to $879 million). In its earnings release, MasterCard attributed this to its cost management efforts and hedging activities.

Credit crossing bordersSince MasterCard functions as the payment processor for transactions effected through its network rather than the issuer of the credit used, the company depends on volume to make money.

Its volume figures for the quarter were fairly robust, although they were impacted by the recent strength in its home currency, the U.S. dollar. MasterCard products are used in all corners of the world, and non-U.S. markets account for the bulk of the company's revenue (in the first quarter this was 62%, to be exact).

All told, gross dollar volume rose by 12% on a local currency basis, but by just under 2% in dollar terms, to land at slightly over $1 trillion.

In spite of the generally good health of the American economy during the quarter, MasterCard saw the highest volume growth abroad. Combined, its non-U.S. markets spiked this metric by nearly 15%. In dollar terms, however, the $724 billion result was essentially flat from the first quarter of 2014.

The dollar dragMasterCard anticipated the currency issue when it unveiled its fourth-quarter and full-year 2014 results earlier this year, so it wasn't much of a surprise to hear of its dampening effect on this quarter's numbers.

What's a little more of a concern is that, going forward, this effect might grow. In a conference call discussing the earnings results, CFO Martina Hund-Mejean said that the company now believes it will experience "more significant headwinds" from the bulked-up greenback for the remainder of the year.

That's likely a major reason why the stock traded sideways in the wake of the results announcement, despite the convincing earnings beat. It ended Wednesday at $90.25, a mere $0.02 over the previous day's closing price.

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