Mastercard Incorporated MA is set to report third-quarter 2024 results on Oct. 31, 2024, before the opening bell. The Zacks Consensus Estimate for third-quarter earnings is currently pegged at $3.73 per share, implying solid growth of 10% from the year-ago reported number. The estimate remained stable over the past week.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The Zacks Consensus Estimate for third-quarter revenues is currently pegged at almost $7.3 billion, indicating an 11% uptick from the year-ago actuals.
Image Source: Zacks Investment Research
Mastercard beat the consensus estimate for earnings in each of the trailing four quarters, with the average surprise being 3.5%. This is depicted in the graph below:
Mastercard Incorporated Price and EPS Surprise
Mastercard Incorporated price-eps-surprise | Mastercard Incorporated Quote
Q3 Earnings Whispers
Our proven model predicts an earnings beat for MA this time around as well. 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.
The company has an Earnings ESP of +0.44%. This is because the Most Accurate Estimate currently stands at $3.75 per share, higher than the Zacks Consensus Estimate of $3.73. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Mastercard currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Shaping Q3 Results
Mastercard is expected to have witnessed an increase in third-quarter revenues, driven by increased spending in the travel and entertainment sectors and cross-border volumes. 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% rise from the prior-year quarter’s reported figure, whereas our model predicts a 9.1% increase. We expect GDV from domestic operations to increase by almost 7.1% year over year and nearly 12.4% in international operations. Increasing 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 9.7% rise from the prior-year quarter’s reported figure, whereas our estimate suggests a 9.1% increase.
Rebounding 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 17.2% compared with the previous year, while our projection indicates growth of 17.9%.
Further, our model predicts domestic assessments and transaction processing assessments to witness a 10.2% and 8.8% year-over-year increase, respectively. The consensus estimate for domestic and transaction processing assessments indicates a rise of 8.8% and 10% year over year in the third quarter, respectively.
We expect Value-added Services and Solutions net revenues to increase 18% year over year in the third quarter. Continued demand for its consulting and marketing services and loyalty solutions is likely to have driven this metric.
However, it is likely that the company also incurred higher costs, as well as higher rebates and incentives in the September quarter, which could partially offset these positive developments.
Mastercard’s adjusted operating costs are likely to have increased in the third quarter due to higher G&A costs and Advertising & Marketing expenses, potentially hampering its profitability. We expect total adjusted operating expenses to increase 11.2% from the prior-year quarter’s actuals. Furthermore, our estimate for payments network rebates and incentives suggests a 17.1% year-over-year increase.
Price Performance & Valuation
Mastercard’s stock has exhibited an upward movement in the year-to-date period. MA rose 19.2%, outperforming its industry’s rise of 13.6%. In comparison, its peers like Visa Inc. V and Euronet Worldwide, Inc. EEFT have gained 9.2% and 0.1%, respectively, during the same time frame. However, Mastercard lagged the S&P 500, which rallied 22.2% during the same period.
MA’s YTD Price Performance
Image Source: Zacks Investment Research
Now, let’s look at the value Mastercard offers investors at current levels.
The company’s valuation looks somewhat stretched compared with the industry average. Currently, MA is trading at 31.29X forward 12 months earnings, above the industry’s average of 23.64X, indicating investors’ confidence.
Image Source: Zacks Investment Research
Investor Considerations
Mastercard is positioned well for long-term growth, bolstered by strategic technology upgrades, a diverse product portfolio, global expansion, and strategic acquisitions and partnerships. So far, resilient consumer spending and rebounding domestic and international economies have propelled its bottom line. With robust cash reserves and a steady stream of cash flow, Mastercard is primed for strategic investments that benefit shareholders, including share buybacks and dividends, underscoring its commitment to long-term value creation.
Conclusion
Resilient consumer spending coupled with improving cross-border volumes and transaction growth are likely to have offset any negative impact of rising expenses, resulting in an earnings beat in the third quarter. Continued demand for its value-added services and enhanced payment technology are expected to have made a positive impact on MA’s top line. Given these positive factors, long-term growth potential and another potential earnings beat around the corner, investors can consider buying MA stock now.
Research Chief Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners UpMastercard Incorporated (MA) : Free Stock Analysis Report
Visa Inc. (V) : Free Stock Analysis Report
Euronet Worldwide, Inc. (EEFT) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
