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Will Higher Consumer Spend Aid Mastercard's (MA) Q2 Earnings?

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Mastercard Inc. (MA - Free Report) is scheduled to release second-quarter 2021 results on Jul 29, before the market opens.

Q2 Earnings & Revenue Expectations

The Zacks Consensus Estimate for Mastercard’s earnings of $1.72 per share indicates a 26.47% upside from the prior-year period’s reported number. The consensus estimate for sales of $4.36 billion suggests a 30.82% increase from the year-ago quarter’s reported figure.

Factors Likely to Impact Q2 Results

The world’s second-largest electronic payment network draws revenues as a set percentage of the total transaction value everytime a customer’s debit/credit card is used for making payments. Thus, higher spending on its cards means more revenues in the form of transaction processing fees.

Consumers as well as merchants adapted to digital payments bigtime following the coronavirus outbreak, given the ease, convenience and security the same offers. These trends bode well for this payment processor and might have already aided its performance in the June quarter.

Last year, the company suffered a revenue decline as people limited their spending on non-discretionary purchases and stopped travelling in the face of the pandemic. Even though the surge in e-commerce rescued the company, broad-based spending was lower.

Consumer spending, however, has been better this year so far amid easing of restriction owing to vaccination rollout, pent-up demand, higher personal savings and a bullish consumer sentiment. Evidently, retail sales have been trending higher of late and are expected to reflect on the upcoming quarterly results.

Mastercard is one of the most widely used cards by shoppers when making payments both offline and online, given its global network, brand name, security, flexibility and reliability. So as people make more payments via the company’s co-branded cards, the quarter is likely to have witnessed higher Switched transactions, which include transactions it authorized, cleared and settled. The Zacks Consensus Estimate for switched transactions is pegged at $25.91 billion, indicating 33.8% growth from the year-ago quarter’s reported number.

The company’s cross-border revenues, which carry higher margins, were dragged down by the suspension of international travel. With the opening of economies, cross-border travel is picking up but at a very slow pace. Thus, cross-border revenues are expected to have fared better in the June quarter than the last few quarters. However, a complete recovery is yet to be seen. With the Delta variant showing no signs of subsiding, cross-border travel see a delay in resuming to pre-COVID levels.

Earnings Surprise History

The company boasts a pleasant earnings surprise record. Its bottom line beat estimates in three of the last four quarters (missing the mark just once), the average beat being 9.03%. 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 predicts an 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 just the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Earnings ESP: Mastercard has an Earnings ESP of +0.22%.

Zacks Rank: Mastercard currently has a Zacks Rank #3

Stocks to Consider

The following stocks in the payments space currently carry a Zacks Rank #2 and a positive Earnings ESP. These stocks are predicted to surpass estimates this reporting cycle. You can see  the complete list of today’s Zacks #1 Rank stocks here.

Global Payments Inc. (GPN - Free Report) has an Earnings ESP of +2.31%.

Visa Inc. (V - Free Report) has an Earnings ESP of +3.20%.

EVO Payments, Inc. (EVOP - Free Report) has an Earnings ESP of +12.71%.


In-Depth Zacks Research for the Tickers Above

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Mastercard Incorporated (MA) - free report >>

Visa Inc. (V) - free report >>

Global Payments Inc. (GPN) - free report >>

EVO Payments, Inc. (EVOP) - free report >>