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Higher Gross Dollar Volume to Aid Mastercard (MA) Q4 Earnings

Sapna Bagaria

Mastercard Inc. MA fourth-quarter earnings are expected to have benefited from increase in retail spending, which was 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 the same is $1.73 trillion, up 11.5% year over year. In the AMEA (Asia Pacific, Middle East and Africa), Canada, Europe and Latin America, total payments volume is expected to be up by 11.7%, 8.7%, 16.1% and 15.3%, respectively, year over year.

In Europe, the company is likely to have witnessed a modest growth in gross dollar value. Fourth-quarter retail sales in the U.K. showed a contraction as consumers became skeptical amid the political uncertainly in the region.

Spending in Asia Pacific will be impacted by U.S.-China trade negotiations. The company, however, expects that accommodative monetary policies in several markets should support growth in the region.

In Latin America, gross dollar value is likely to be impacted by mixed spending from different regions. Brazil and Colombia are expected to reflect growth, whereas weakness in Argentina and Mexico might persist.
Increase in total payment volume can be attributed to strategic partnerships, deal signings, acquisitions and product roll out in these regions over the past several years.

Overall, we expect to see an increase in net revenue primarily driven by strong volume and transaction growth, as well as rise in service offerings, partially offset by higher rebates and incentives. (Read more: Will Mastercard Q4 Earnings Gain From Higher Spending?)

Zacks Rank & Stocks to Consider

Mastercard carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space are Global Payments Inc. GPN, Fidelity Information Services, Inc. FIS and Square, Inc. SQ.
Global Payments has an Earnings ESP of +3.15% and a Zacks Rank of 2 (Buy).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fidelity Information Services has an Earnings ESP of +0.45% and a Zacks Rank #2.

Square has an Earnings ESP of +6.14% and a Zacks Rank #3.

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