What happened?
Shares of global payments technology company Mastercard (NYSE: MA) jumped 4.2% in the afternoon session after the company reported third-quarter adjusted earnings per share and revenue above analyst expectations. According to a company press release, Mastercard reported adjusted diluted earnings per share of $5.31, up 21% from $4.38 a year earlier and above the analyst estimate of $5.17. Net revenue rose 14% to $9.8 billion, above the estimate of $9.67 billion. GAAP diluted earnings per share was $5.28, and net income was $4.6 billion, up 18%. Operating income was $5.9 billion, and the operating margin was 59.8%, compared with 58.8% a year earlier. Gross dollar volume rose 7% and purchase volume rose 9%, both on a local-currency basis.
After the initial pop, the shares cooled down to $636.04, up 4.2% from the previous close.
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What is the market telling us
Mastercard’s shares are not very volatile and have only had 1 move greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 10 months ago when the stock dropped 5.2% on the news that a proposal to cap credit card interest rates at 10% for one year sparked investor concern. The proposal, suggested by President Donald Trump, directly impacted major credit card companies, with both Mastercard and Visa ranking among the biggest decliners in the S&P 500. Investors worried that the cap, although aimed at helping consumers, could significantly squeeze the earnings of card companies. One analyst noted that forcing companies to lower their lending rates would "upend the basic economics of the industry," while another pointed to "heightened near-term volatility" for the group.
Mastercard is up 12.9% since the beginning of the year, and at $636.04 per share, it has set a new 52-week high. Investors who bought $1,000 worth of Mastercard’s shares 5 years ago would now be looking at an investment worth $1,896.
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