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Mastercard (MA) to Report Q2 Earnings: What's in the Cards?

Zacks Equity Research

Mastercard Incorporated MA is set to report second-quarter 2019 earnings results on Jul 30.

The Zacks Consensus Estimate for earnings in the to-be-reported quarter is $1.82 per share on revenues of $4.09 billion, which translates into year-over-year growth of 9.64% and 11.6%, respectively.

Factors to Affect Q2 Results

Mastercard's results for the to-be-reported quarter 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 have driven 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.

The company continues to see a strong shift to electronic forms of payment, which is driving healthy double-digit volume and transaction growth across most of its markets.

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.

For the second quarter, Mastercard expects revenue growth to be in line or slightly better than first-quarter growth of 13%. Also, the company expects foreign exchange to have 3% adverse impact on revenues in the to-be-reported quarter.

The company anticipates operating expenses in the second quarter to grow at approximately twice the annual growth rate (the high end of high single-digits rates) due to a significant hedging gain a year ago and increased marketing spend. The impact of currency exchange is expected to reduce operating expense by about 1% in the second quarter.

Earnings per share will also suffer in the range of 6-8 cents from the dilutive effect of the recent acquisitions made by the company.

Earnings Surprise History

The company boasts an attractive earnings surprise history, having surpassed estimates in each of the trailing four quarters with an average beat of 5.75%. This is depicted in the chart below:

Mastercard Incorporated Price and EPS Surprise

Mastercard Incorporated Price and EPS Surprise

Mastercard Incorporated price-eps-surprise | Mastercard Incorporated Quote

Here is what our quantitative model predicts:

Our proven model conclusively shows that Mastercard is likely to beat estimates this earnings season. This is because it has the right combination of a positive Earnings ESP and a top Zacks Rank.

Earnings ESP: Mastercard has an Earnings ESP of +0.55%. This is because the Most Accurate Estimate of $1.83 per share is pegged higher than the Zacks Consensus Estimate of $1.82 per share. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter

Zacks Rank: Mastercard carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP.

Other Stocks That Warrant a Look

Here are a few other stocks that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat in the upcoming release.

Fiserv, Inc. FISV has an Earnings ESP of +.79% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Global Payments, Inc. GPN has an Earnings ESP of +0.18% and a Zacks Rank #3.

Green Dot Corp. GDOT has an Earnings ESP of +0.89% and a Zacks Rank #3.

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