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Higher Gross Dollar Volume to Aid Mastercard (MA) Q2 Earnings

Zacks Equity Research

Mastercard Incorporated MA second-quarter earnings are expected to benefit from increase in retail spending, which was in turn driven by strong U.S. economy, low unemployment and a solid consumer confidence index.

This should drive the company's gross dollar value (GDV), which measures dollar value of total transactions processed. The Zacks Consensus Estimate for GDV is $1.62 trillion, up 9.8% year over year.

In the Asia Pacific, Middle East and Africa (APAC), Canada, Europe, Latin America GDV is expected to be $496 billion, $48 billion, $484 billion, $109 billion  up 9%, 9.1%, 11.1% and 9%, respectively, year over year.

The increase in GDV is likely to be driven by a slew of partnerships, deal signings, acquisitions and product rollout in these regions over the years.

In Europe, GDV is expected to witness a moderate growth. Consumer confidence remains mixed with decline in places like the UK, Ireland and the Netherlands. Despite the uncertainty surrounding Brexit, UK retail spending remains healthy.

Spending in Asia Pacific, which drives GDV, will be impacted by trade policy uncertainty.  In China, the region is witnessing modest GDVgrowth underpinned by favorable monetary policies and generally stable labor market conditions.

In Latin America, the spending outlook is mixed with positive signs in Brazil and Chile but  weakness in Mexico. Similarly, in the Middle East and Africa region, healthy growth is anticipated in countries like Egypt, but softness in the oil producing markets remains a concern. Meanwhile, the company's business continues to drive healthy double-digit volume and transaction growth across most of its markets by successfully executing its strategies.

Overall, we expect to see an increase in net revenue primarily driven by strong volume and transaction growth, as well as increase in service offerings, partially offset by higher rebates and incentives. (Read more: Mastercard (MA) to Report Q2 Earnings: What's in the Cards?)

Mastercard carries a Zacks Rank #3 (Hold). Other companies in the same space such as American Express Co. AXP, Visa Inc. V and Discover Financial Services DFS, beat their recently reported earnings by 0.98%,3.01%, and 9.95%, respectively.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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