On Friday, MasterCard (MA) announced its quarterly results and many investors were not happy at all with these results. The company earned $684 million or 57 cents per share on revenues of $2.12 billion for the quarter as the gross dollar volume increased by 14% and purchase volume increased by 12% year-over-year. Many investors were looking for stronger growth rates and they are concerned that the company's growth is slowing down. Others are wondering if the slowdown is due to the global economy and whether it had anything to do with MasterCard at all. Given that most retailers like Best Buy (BBY) and Amazon (AMZN) failed to beat the estimates during the holiday season, those who are blaming the global economy rather than the company might be on to something.
The transactions for the quarter totaled $1.1 trillion with cross-border volumes rising faster than the overall volumes (18% vs. 11%). There are now over 2 billion MasterCard and Maestro-branded cards that were issued by the company.
During the quarter, MasterCard had to offer more rebates and incentives than usual, which ate into the company's net margins. The company's higher investments, new hiring and marketing initiatives in the fourth quarter increased the operating costs by 11% year-over-year. This excludes one-time items, inclusion of which would grow the operating costs by 21% compared to the previous year.
For the full-year, MasterCard earned a net income of $3.2 billion or $2.61 per share, which indicates a growth rate of 15% (or 19% if we factor the reduced dilution due to share repurchases) compared to the previous year. This excludes one-time items, such as the litigation charges and expenses that occurred in 2012 and 2013. MasterCard generated $8.3 billion in revenues for the full-year of 2013, indicating a revenue growth of 13%. Since the company's revenue growth was slower than its earnings growth, we are looking at a margin expansion for the year of 2013. For the full-year of 2013, gross dollar volume was up by 14%, cross-border volume was up by 18% and processed transaction was up by 13%. Again, rebates, incentives and increased marketing costs ate into the company's profit margins to offset some of the gains. For the full-year, operating expenses rose by 9% excluding one-time items and 11% including one-time items. MasterCard's operating margin for the full-year was as high as 55.1%.
During the year, the company's cash rose from $2.05 billion to $3.60 billion, with about $723 million additional cash in restricted accounts that were set aside for the litigation settlement charges faced by the company. The company has another $2.70 billion in highly-liquid assets. During the year, settlement due from customers rose from $1.12 billion to $1.35 billion. This could be due to more customers having trouble with paying their bills, another signal about the state of the global economy. The company's settlement due to customers rose at an even faster rate from $1.06 billion to $1.43 billion. MasterCard's total assets rose from $12.46 billion to $14.24 billion for the full-year, which indicates a growth of 14%. Meanwhile, the company's liabilities rose from $5.53 billion to $6.75 billion, a growth of 22%. MasterCard continues to be debt free and the company's book value is now $7.50 billion, up from $6.92 billion a year ago.
MasterCard spent $751 million in order to repurchase 9.8 million shares during the quarter. In addition, the company bought another 4.2 million shares at $351 million in the first 24 days of this year. For the full-year of 2013, the company bought back 41 million shares, spending $2.4 billion. MasterCard still has about $3.3 billion in the approved budget for stock repurchases and it will be making more repurchases throughout 2014. The company recently had a stock split, which brought the stock price to $70s from $700s.
After Friday's sell-off, MasterCard's market value is about $90 billion or $75 per share. Given the company's $2.57 per share in net earnings, MasterCard currently trades for 29 times its trailing earnings. If the company can continue to grow its earnings in double-digits, this P/E may be deserved but if the growth slows down any further, investors might start cashing out at faster rates. In 2012, MasterCard earned $2.76 billion and the company spent $2.4 billion in the following year (as mentioned above) on stock purchases. In 2013, it earned $3.1 billion and it is scheduled to spend about $3.3 billion in stock repurchases. As you can see, MasterCard spends nearly all of its earnings on stock purchases and returns value to shareholders even though the dividend yield is below 0.60%. The analysts expect MasterCard to earn $3.11 this year and $3.68 next year. If the company keeps growing its earnings in double-digits and continues to repurchase its stocks in large numbers, it will continue to be a good investment for most investors. The next few quarters of MasterCard will tell us a lot about not only the company, but also about the state of the global economy.