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Mastercard Inc. topped third-quarter earnings and revenue expectations Tuesday as the company talked up its various efforts outside of traditional card payments, including business services and commercial payment tools.
The payments giant saw a 33% increase in its “other” revenue line, which marked an acceleration from 23% growth in the June quarter. While acquisitions accounted for about four points of the increase, Mastercard MA, -0.62% said that strength in its data and cyber intelligence services helped drove a good portion of the remaining growth.
Shares were off 0.3% in Tuesday afternoon trading.
Mastercard’s earnings release comes as the company has a large presence at the ongoing Money20/20 financial technology conference in Las Vegas, where Mastercard introduced several non-card offerings, including a blockchain solution for tracking the seafood supply chain and a healthcare solution aimed at detecting fraud and waste in the system.
Chief Financial Officer Sachin Mehra told MarketWatch Tuesday that Mastercard is trying to solve more customer pain points through these products. “If we have to solve based on providing solutions on non-card rails, we’ll do that as well” as providing card-based offerings, he said.
Raymond James analyst John Davis said he liked what he heard on the services front. “In our view, one of the biggest positives was the significant upside in other revenues,” wrote Davis, who rates the stock at outperform with a $325 target. “Additionally, we believe management’s services strategy is taking hold, which, with investor day comments that services margins have significantly ramped over several years, bodes well for the outlook.”
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Another focus area for the company is commercial payments, as Mastercard is looking to get a bigger piece of the lucrative market for business-to-business (B2B) transactions. Many businesses still write paper checks or wire money for supplier payments and they generally don’t use credit cards for them. Mastercard recently beefed up its Track product for B2B services by letting companies choose from various payment types for commercial transactions while also transmitting purchase data.
Mehra said that the Mastercard Track offering is also meant to solve customer pain points, “not about saying the ACH doesn’t work,” referring to wire payments. Mastercard’s B2B product seeks to address issues with data transmission, need for working capital, security, and user experience, according to Mehra.
On its earnings call, the company noted that Bank of America Corp. “is committed to being our next Mastercard track B2B Hub customer, bringing enhanced account-payable capabilities to its clients in the United States.”
Mastercard posted net revenue of $4.5 billion for its third quarter, up from $3.9 billion a year prior. After adjusting for stock-based compensation and other expenses, earnings per share climbed to $2.15 from $1.78. Analysts surveyed by FactSet were expecting $4.4 billion in revenue and $2.01 in earnings. Piper Jaffray analyst Jason Deleeuw estimates that a lower tax rate contributed about 6 cents.
