Mastercard (MA) Q2 Earnings to Gain on Transaction Growth
Mastercard Inc. MA is scheduled to report second-quarter 2018 results on Jul 26, before the opening bell. We expect earnings to see an upside from a strong U.S. economy, solid consumer confidence and low unemployment, which must lead to higher spending via cards, thereby boosting gross dollar volumes and processed transaction. The Zacks Consensus Estimate for processed transaction is 18.12 billion, up 13.2% year over year.
We expect an increase in revenues from the company’s Service Business led by its efforts in expanding this business, which has been posting strong earnings for the past many years. Higher utilization of the company's service offerings led to revenue acceleration in the previous quarter, and the same is expected in the quarter to be reported.
A decline in tax rate as a result of the recently passed Tax Cuts and Jobs Act will aid the company’s margins.
Among regions, business growth will be seen in Asia, Australia, ASEAN countries, led by improvement in consumer and business sentiment. The Latin American region, which is recovering from economic recession, should also lead to business growth, while Europe should see mild growth. The company’s global business should drive its worldwide gross dollar volume, which is expected to be $1.34 trillion, up 13% year over year.
The strengthening of dollar in the second quarter will provide a headwind to earnings.
On the expense front, the company continues to invest in strategic initiatives such as digital infrastructure, safety and security platforms, data analytics and geographic expansion as well as higher costs related to its increased revenues in certain areas such as loyalty. These costs may lead to an increase in operating expenses.
Earnings Surprise History
The company boasts an attractive earnings surprise history, having surpassed estimates in each of the trailing four quarters, with an average positive surprise of 8.89%. This is depicted in the chart below:
Mastercard Incorporated Price and EPS Surprise
Mastercard Incorporated Price and EPS Surprise | Mastercard Incorporated Quote
Why a Likely Positive Surprise?
Our proven model does not conclusively show that Mastercard is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1, 2 or 3 for this to happen. But that is not the case here as you will see below.
Earnings ESP: Mastercard has an Earning ESP of -0.23%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Though Mastercard carries a Zacks Rank #3 (Hold), a negative Earnings ESP makes our surprise prediction difficult.
Stocks That Warrant a Look
Here are some companies that you may consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Visa Inc. V is expected to report third-quarter fiscal 2018 earnings on Jul 25. This Zacks #3 Ranked stock has an Earnings ESP of +0.04%.
You can see the complete list of today’s Zacks #1 Rank stocks here.
WEX Inc. WEX has an Earnings ESP of +0.28% and a Zacks Rank #2. The company is expected to report second-quarter earnings results on Aug 2.
Total System Services, Inc. TSS has an Earnings ESP of +1.81% and a Zacks Rank #3. The company is expected to report second-quarter earnings results on Jul 24.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
WEX Inc. (WEX) : Free Stock Analysis Report
Mastercard Incorporated (MA) : Free Stock Analysis Report
Visa Inc. (V) : Free Stock Analysis Report
Total System Services, Inc. (TSS) : Free Stock Analysis Report
To read this article on Zacks.com click here.
