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Can Mastercard's (MA) Q4 Earnings Beat on Cross-Border Volumes?
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Mastercard Incorporated (MA - Free Report) is set to beat on earnings for the fourth quarter of 2023, the results for which are scheduled to be released on Jan 31, before the opening bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for fourth-quarter earnings per share of $3.08 suggests a 16.2% increase from the prior-year figure of $2.65. The consensus mark has remained stable over the past week. The consensus estimate for fourth-quarter revenues of $6.5 billion indicates an 11% increase from the year-ago reported figure.
Mastercard beat estimates in all the trailing four quarters, delivering an average surprise of 3.6%. This is depicted in the graph below.
Our proven model predicts a likely 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, which is precisely the case here.
Earnings ESP: Mastercard has an Earnings ESP of +0.39%. This is because the Most Accurate Estimate is currently pegged at $3.09 per share, higher than the Zacks Consensus Estimate of $3.08. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Mastercard currently has a Zacks Rank #3.
Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at MA’s previous-quarter performance first.
Q3 Earnings Rewind
In the last reported quarter, the leading global payment solutions company’s adjusted earnings per share of $3.39 beat the Zacks Consensus Estimate by 5.6%. This was primarily driven by strong consumer spending and solid growth in travel and non-travel cross-border spending. The rise in switched transactions also contributed to the quarterly results. However, the upside was partly offset by elevated operating expenses.
Mastercard is expected to have witnessed a surge in fourth-quarter revenues, driven by increased spending in the travel and entertainment sectors. The Gross Dollar Volume (GDV), reflecting the value of transactions on Mastercard-branded cards, is expected to have benefited from increased card usage, both domestically and internationally, in the upcoming quarter.
The Zacks Consensus Estimate for the company’s total GDV for all MA-branded programs suggests a 10.9% rise from the prior-year quarter’s reported figure, whereas our model predicts a 10.1% increase. We expect GDV from domestic operations to have increased almost 7% year over year and nearly 12% in international operations. Growing strength in Latin American and European operations is likely to have driven the metric.
Processed transactions are expected to have experienced an upsurge, driven by resilient consumer spending and increased contactless acceptance initiatives pursued by the payment technology company. The Zacks Consensus Estimate for its processed transactions indicates a 10.6% rise from the prior-year quarter’s reported figure, whereas our estimate suggests a 10.5% increase.
The continuous growth of cross-border travel is anticipated to have had a positive impact on Mastercard's cross-border volumes. The consensus estimate for cross-border assessments suggests an increase of 20.5% compared with the previous year, while our projection indicates growth of 21.7%. Further, our model predicts domestic assessments and transaction processing assessments to witness a 13.3% year-over-year increase each.
All the factors mentioned above are expected to have propelled Mastercard's results for the quarter-under-review, driving substantial growth compared to the prior year and positioning it for a potential earnings beat. However, it is likely that the company also faced increased costs, as well as higher rebates and incentives in the December quarter, which could partially offset these positive developments.
Mastercard’s adjusted operating costs are likely to have increased in the fourth quarter due to higher G&A costs and Advertising & Marketing expenses, potentially hampering its profitability. We expect total adjusted operating expenses to increase nearly 10% from the prior-year quarter’s actuals.
Furthermore, our estimate for payments network rebates and incentives suggests an 18.5% year-over-year increase. Also, due to the high interest rate environment, the company’s interest expense figure is likely to have jumped around 14% from the prior-year period.
Other Stocks That Warrant a Look
Here are some other companies worth considering from the broader Business Services space, as our model shows that these, too, have the right combination of elements to beat on earnings this time around:
The Zacks Consensus Estimate for PagSeguro’s bottom line for the to-be-reported quarter is pegged at 29 cents per share, which suggests a 20.8% year-over-year jump. The estimate remained stable over the past week. PAGS beat earnings estimates in all the past four quarters, with an average surprise of 9%.
Fidelity National Information Services, Inc. (FIS - Free Report) has an Earnings ESP of +3.40% and is a Zacks #3 Ranked player.
The Zacks Consensus Estimate for Fidelity National’s bottom line for the to-be-reported quarter is pegged at 95 cents per share, which remained stable for the past week. It beat earnings estimates thrice in the past four quarters and missed once. Furthermore, the consensus mark for FIS’ revenues is pegged at more than $2.5 billion.
S&P Global Inc. (SPGI - Free Report) has an Earnings ESP of +0.85% and a Zacks Rank of 2.
The Zacks Consensus Estimate for S&P Global’s bottom line for the to-be-reported quarter is pegged at $3.14 per share, indicating 23.6% year-over-year growth. SPGI beat earnings estimates in three of the past four quarters and met once, with an average surprise of 4%.
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Can Mastercard's (MA) Q4 Earnings Beat on Cross-Border Volumes?
Mastercard Incorporated (MA - Free Report) is set to beat on earnings for the fourth quarter of 2023, the results for which are scheduled to be released on Jan 31, before the opening bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for fourth-quarter earnings per share of $3.08 suggests a 16.2% increase from the prior-year figure of $2.65. The consensus mark has remained stable over the past week. The consensus estimate for fourth-quarter revenues of $6.5 billion indicates an 11% increase from the year-ago reported figure.
Mastercard beat estimates in all the trailing four quarters, delivering an average surprise of 3.6%. This is depicted in the graph below.
Mastercard Incorporated Price and EPS Surprise
Mastercard Incorporated price-eps-surprise | Mastercard Incorporated Quote
What the Quantitative Model Suggests
Our proven model predicts a likely 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, which is precisely the case here.
Earnings ESP: Mastercard has an Earnings ESP of +0.39%. This is because the Most Accurate Estimate is currently pegged at $3.09 per share, higher than the Zacks Consensus Estimate of $3.08. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Mastercard currently has a Zacks Rank #3.
Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at MA’s previous-quarter performance first.
Q3 Earnings Rewind
In the last reported quarter, the leading global payment solutions company’s adjusted earnings per share of $3.39 beat the Zacks Consensus Estimate by 5.6%. This was primarily driven by strong consumer spending and solid growth in travel and non-travel cross-border spending. The rise in switched transactions also contributed to the quarterly results. However, the upside was partly offset by elevated operating expenses.
Now, let’s see how things have shaped up prior to the fourth-quarter earnings announcement.
Factors Driving Q4 Performance
Mastercard is expected to have witnessed a surge in fourth-quarter revenues, driven by increased spending in the travel and entertainment sectors. The Gross Dollar Volume (GDV), reflecting the value of transactions on Mastercard-branded cards, is expected to have benefited from increased card usage, both domestically and internationally, in the upcoming quarter.
The Zacks Consensus Estimate for the company’s total GDV for all MA-branded programs suggests a 10.9% rise from the prior-year quarter’s reported figure, whereas our model predicts a 10.1% increase. We expect GDV from domestic operations to have increased almost 7% year over year and nearly 12% in international operations. Growing strength in Latin American and European operations is likely to have driven the metric.
Processed transactions are expected to have experienced an upsurge, driven by resilient consumer spending and increased contactless acceptance initiatives pursued by the payment technology company. The Zacks Consensus Estimate for its processed transactions indicates a 10.6% rise from the prior-year quarter’s reported figure, whereas our estimate suggests a 10.5% increase.
The continuous growth of cross-border travel is anticipated to have had a positive impact on Mastercard's cross-border volumes. The consensus estimate for cross-border assessments suggests an increase of 20.5% compared with the previous year, while our projection indicates growth of 21.7%. Further, our model predicts domestic assessments and transaction processing assessments to witness a 13.3% year-over-year increase each.
All the factors mentioned above are expected to have propelled Mastercard's results for the quarter-under-review, driving substantial growth compared to the prior year and positioning it for a potential earnings beat. However, it is likely that the company also faced increased costs, as well as higher rebates and incentives in the December quarter, which could partially offset these positive developments.
Mastercard’s adjusted operating costs are likely to have increased in the fourth quarter due to higher G&A costs and Advertising & Marketing expenses, potentially hampering its profitability. We expect total adjusted operating expenses to increase nearly 10% from the prior-year quarter’s actuals.
Furthermore, our estimate for payments network rebates and incentives suggests an 18.5% year-over-year increase. Also, due to the high interest rate environment, the company’s interest expense figure is likely to have jumped around 14% from the prior-year period.
Other Stocks That Warrant a Look
Here are some other companies worth considering from the broader Business Services space, as our model shows that these, too, have the right combination of elements to beat on earnings this time around:
PagSeguro Digital Ltd. (PAGS - Free Report) has an Earnings ESP of +10.35% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for PagSeguro’s bottom line for the to-be-reported quarter is pegged at 29 cents per share, which suggests a 20.8% year-over-year jump. The estimate remained stable over the past week. PAGS beat earnings estimates in all the past four quarters, with an average surprise of 9%.
Fidelity National Information Services, Inc. (FIS - Free Report) has an Earnings ESP of +3.40% and is a Zacks #3 Ranked player.
The Zacks Consensus Estimate for Fidelity National’s bottom line for the to-be-reported quarter is pegged at 95 cents per share, which remained stable for the past week. It beat earnings estimates thrice in the past four quarters and missed once. Furthermore, the consensus mark for FIS’ revenues is pegged at more than $2.5 billion.
S&P Global Inc. (SPGI - Free Report) has an Earnings ESP of +0.85% and a Zacks Rank of 2.
The Zacks Consensus Estimate for S&P Global’s bottom line for the to-be-reported quarter is pegged at $3.14 per share, indicating 23.6% year-over-year growth. SPGI beat earnings estimates in three of the past four quarters and met once, with an average surprise of 4%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.