Mastercard (NYSE:MA) stock has rallied over 10% since the lows of the year earlier this month. That was a good buying opportunity, but shares are still attractive here in our opinion as they are down $84, or 21% from 52-week highs. Look, shares have pulled back with the entire market. For Mastercard there are concerns that a global recession will simply slow transaction volume and subsequently reduce revenue. To keep margins strong the company can reduce expenses but that will only go so far. The reality is that this type of company should still do relatively well even in a mild recession as banks back so many cards issued by Mastercard, and from what we have seen in bank earnings reports thus far, credit card spending remains strong. We like this stock under $300, but think a first buy can be made here at $315. The company just reported Q3 earnings and they were mixed. Growth is slowing a little, but performance remains strong. Payment volumes are expanding. We think any recession is mild and temporary, so long as inflation is coming down and the Fed does not have to raise rates at a blistering pace in 2023 as well. Shares could fall further if the macro situation changes, such as more rate hikes than expected, or continued poor economic data, but today's GDP numbers suggest growth continues. We think traders should take advantage of depressed shares and do some buying now and on further weakness.
As the pressure continues with higher rates, and possible recession lands, there could be reduced volumes, less consumer spending, and a slowdown in growth, likely for a few quarters. It is a risk, but much of this is priced in when the stock dips under $300. Yes, valuation-wise, the stock has long been overvalued, but that valuation has come down lower over the past few months. Regardless of what is happening quarter to quarter in the world, Mastercard as a company has continued to invest in itself. The company has moved more into helping banks stop crypto fraud, but also promoting them to be able to trade crypto. Mastercard continues to forge new deals with many banks and businesses as well. In this column, we will examine trends in sales and earnings and discuss our expectations for the rest of the year.
Despite the economy starting to weaken, the data remains relatively strong, particularly against expectations. Here in Q3 the company saw top line expansion. While growth slowed from Q2, there remains strong spending power for consumers. The risk is that this strength erodes in early 2023, but Mastercard is well-positioned for a mild recession. The past growth in revenues has been impressive, though there was some declines the year of COVID. Here in Q3 2022, economic activity remained strong. Internationally, activity has been mixed. We expect Q4 will see domestic strength for the holiday season, but continued mixed international results.
Net revenue for the quarter came in at $5.8 billion, a 15% increase from Q3 2021. Consumer spending remains strong. Cross-border activity is still hefty, though because Mastercard does a lot of business internationally revenues suffered due to currency. If we control for currency revenues surged 23%. Solid gains. They also beat consensus estimates by $140 million.
Mastercard saw an 11% increase in gross dollar volume, at the higher (better) end of our Q3 expectations for 8%-12% increases, and saw a 44% increase in cross-border payment volumes. On top of this, transactions processed were up 9%. The transaction increases drove the increases we saw in revenues. As we mentioned earlier, internationally the global picture is mixed, as places like Europe are experiencing weakness, but overall international volumes are up thanks to the extensive work of the company to expand overseas. The company since COVID-19 has done a great job managing expenses as well.
Operational expenses have continued to rise rather sharply in recent years, following revenue increases. You have to spend money to make money as they say. With revenues rising, we were looking for expenses to increase. We really like to see the pace of expenses be less than the pace of revenue growth. Well operating expenses rose year-over-year by 13% on an adjusted basis. On a currency-neutral basis, expenses were up 17%. Both of these increases were a lower pace than revenue growth. We like that. Expenses overall reflect continued investment in strategic initiatives as well as normal operational expenses. Total adjusted operating expenses were $2.4 billion for several reasons, including acquisition-related integration expenses, higher personnel costs, and investment in initiatives to grow payments and network capabilities.
When we factor in the increase in revenues and expenses, we see that it led to operating income increasing as reported to $3.1 billion, from $2.7 billion a year ago, rising 14%. If you adjust for currency, operating income ballooned 24%. Strong. Perhaps not surprising, adjusted operating margin widened to 57.7% from 56.7%. With the top line expansion and better margins, we saw a nice increase in adjusted EPS.
Putting it all together, we see earnings increased, and we expected an increase to $2.50 to $2.60. We saw more cross-border transactions being processed, more total processed transactions, and there were better revenues and margins. Again, expect Q4 to also show similar strength, though this growth was a bit slower than the growth in Q2, we should point out. Much like the revenue trend, the EPS grew in Q3 year-over-year.
Net income was $2.5 billion versus the $2.4 billion a year ago, and hit $2.58 per share versus $2.2.44 per share. On an adjusted basis, EPS hit $2.68, beating expectations by $0.10, and rising 22% from last year. As we move forward, we expect EPS growth to moderate, but remain strong while we work through any economic slowdown as a result of Federal Reserve actions.
There is a lot of uncertainty, election uncertainty in two weeks, and questions over whether the actions to combat inflation will be effective. We would expect some sectors, like staples and ecommerce, to see higher volumes. Others like home improvement or auto services, or high-end discretionary spending, could fall. As we move forward, we continue to like the work the company is doing to innovate in the crypto space, while expanding internationally. There will also be a ton of geographic variability.
Based on what we are seeing to date, we see 2022 revenues coming in at $22.25-22.75 billion and earnings per share coming in at $10.40-10.70. This is based on annual switched transaction volumes increasing in the high single-digits, strong growth in cross-border volumes in the mid double-digits, and operational expenses growing at a lower pace than revenue.
Overall, we like shares as a buy, but really think your bigger block purchases should be made sub-$300.
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Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in MA over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.