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MasterCard (MA) Poised to Beat on Q2 Earnings: Here's Why

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Transaction processor and provider of payment-related services, MasterCard Inc. (MA - Free Report) is scheduled to release second-quarter financial results before the market opens on Jul 28.

In the last reported quarter, MasterCard beat the earnings estimate by 1.18%. Moreover, the company posted a positive earnings surprise in each of the last four quarters, with an average beat of 5.19%. Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that MasterCard is likely to beat on earnings as it has the right combination of two key components. Note that a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or #2 (Buy) or at least #3 (Hold) to have a significantly higher chance of beating estimates.

Zacks ESP: The Earnings ESP for MasterCard is +1.11%. This is because the Most Accurate estimate of 91 cents is above the Zacks Consensus Estimate of 90 cents.

Zacks Rank: MasterCard’s Zacks Rank #3 increases the predictive power of ESP.

Factors to Drive Q2 Results

The three key metrics (purchase volume, cross-border volume, and processed transactions) of MasterCard are expected to maintain the growth trend of past many quarters.

MasterCard has been consistently expanding its geographic footprint, which has resulted in vast membership.  The company is benefiting from the successful integration of its recent acquisitions and continuing to expand its services business. This, in turn, is expected to boost its second-quarter revenues.

Moreover, astute expense management should drive MasterCard’s bottom line.

Also, MasterCard’s card payment transactions are likely to have grown in the to-be-reported quarter on the back of a rise in card-based transactions.

However, total U.S. gross dollar volume growth may be affected by lower gas prices. Also, currency headwinds may impact revenue growth. Higher expected rebates and incentives will drain the bottom line.

Expenses may see an increase due to MasterCard’s continued investments in areas such as digital, data analytics, and safety and security. Higher depreciation and amortization expense may also result from the amortization of intangibles related to its acquisitions.

Then again, aggressive repurchase of shares by should lift the bottom line.

MASTERCARD INC Price and EPS Surprise

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows that these also have the right combination of elements to post an earnings beat this quarter:

LPL Financial Holdings Inc. (LPLA - Free Report) has an Earnings ESP of +2.33% and a Zacks Rank #3. The company is scheduled to report second-quarter earnings results on Jul 28.

Global Payments Inc. (GPN - Free Report) has an Earnings ESP of +1.47% and a Zacks Rank #3. The company is scheduled to report second-quarter earnings results on Jul 28.

Allstate Corp. (ALL - Free Report) has an earnings ESP of +3.7% and a Zacks Rank #3. The company is scheduled to report second-quarter earnings results on Aug 3.

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