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Mastercard (MA) Gears Up for Q2 Earnings: What to Expect?

·5 min read

Mastercard Incorporated MA is set to report second-quarter 2022 results on Jul 28, before the opening bell.

In the last reported quarter, the leading global payment solutions company’s adjusted earnings per share of $2.76 beat the Zacks Consensus Estimate by 27.2%, primarily due to a substantial recovery in cross-border volume, thanks to rebounding cross-border travels. Improved gross dollar volume (GDV) and higher switched transactions contributed to the upside. However, the upside was partly offset by escalating operating expenses.

Let’s see how things have shaped up prior to the second-quarter 2022 earnings announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for second-quarter 2022 earnings per share of $2.36 has witnessed no movements in the past week. The estimate is indicative of a 21% increase from the year-ago reported figure. Similarly, the Zacks Consensus Estimate for revenues is pegged at $5.3 billion, suggesting a 16.3% jump from the year-ago level.

Mastercard beat earnings estimates in each of the trailing four quarters, delivering an average of 14.2%. This is depicted in the graph below.

Mastercard Incorporated Price and EPS Surprise

Mastercard Incorporated Price and EPS Surprise
Mastercard Incorporated Price and EPS Surprise

Mastercard Incorporated price-eps-surprise | Mastercard Incorporated Quote

Factors to Note

Mastercard’s second-quarter revenues are likely to have benefited from increased consumer spending and demand. MA’s GDV (the dollar volume of activity on Mastercard-branded cards during a particular period, on a local currency basis and U.S. dollar-converted basis) is likely to have benefited from increased usage of its debit and credit cards, both within and outside the United States, in the to-be-reported quarter. The Zacks Consensus Estimate for Mastercard’s total GDV for all Mastercard-branded programs is pegged at $2,070 million, which suggests an 8.7% rise from the prior-year quarter’s reported figure.

Meanwhile, switched transactions (the number of transactions initiated and switched through Mastercard’s network) are likely to have witnessed an uptick in the second quarter, owing to improved consumer spending and increased contactless acceptance initiatives pursued by the technology company. The consensus mark for the same indicates an 11.5% increase from the year-ago period.

Increased cross-border travel might have favored cross-border volumes of Mastercard. The Zacks Consensus Estimate for cross-border volume fees is pegged at $1,479 million, signaling a rise from $1,076 million a year ago. The consensus estimate for purchase volume in the U.S. for all Mastercard’s credit charge and debit programs also indicates a 10.4% year-over-year rise.

All the above-mentioned factors might have boosted Mastercard’s results for the second quarter, leading to significant year-over-year growth. Yet, the company is expected to have incurred high levels of cost under rebates and incentives in the June quarter. This might have affected margins. Also, the company’s operating costs are likely to have significantly increased in the second quarter due to higher advertising, marketing and data processing costs, thereby hurting the bottom line and making an earnings beat uncertain.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Mastercard this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.

Earnings ESP: The company’s Earnings ESP is -0.21%. The Most Accurate Estimate currently stands at $2.35 per share, lower than the Zacks Consensus Estimate of $2.36.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Mastercard currently carries a Zacks Rank #3.

Stocks to Consider

While an earnings beat looks uncertain for Mastercard, here are some companies from the broader Business Services space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:

FirstCashHoldings, Inc FCFS has an Earnings ESP of +2.15% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for FirstCash’s bottom line for the to-be-reported quarter indicates a 31% year-over-year increase. FCFS beat earnings estimates in each of the past four quarters, with an average of 20.3%.

WEX Inc. WEX has an Earnings ESP of +2.27% and is a Zacks #2 Ranked player.

The Zacks Consensus Estimate for WEX’s bottom line for the to-be-reported quarter implies a 48.9% improvement from the year-ago figure. WEX beat earnings estimates in each of the past four quarters, with an average of 8.6%.

Nuvei Corporation NVEI has an Earnings ESP of +0.73% and is a Zacks #3 Ranked player.

The Zacks Consensus Estimate for Nuvei’s bottom line for the to-be-reported quarter is pegged at 46 cents per share. The consensus mark for NVEI’s top line is pegged at $218.8 million.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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Mastercard Incorporated (MA) : Free Stock Analysis Report
 
FirstCash Holdings, Inc. (FCFS) : Free Stock Analysis Report
 
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Nuvei Corporation (NVEI) : Free Stock Analysis Report
 
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