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Will Rising Expenses Affect Mastercard's (MA) Q2 Earnings?
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Mastercard Incorporated (MA - Free Report) is set to report second-quarter 2023 results on Jul 27 before the opening bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for second-quarter 2023 earnings per share of $2.87 has witnessed no upward revisions but four downward movements in the past week. The estimate, however, is indicative of a 12.1% increase from the year-ago reported figure. The consensus estimate for revenues is pegged at $6.2 billion, suggesting a 12.3% jump from the year-ago level.
Mastercard beat estimates in all the trailing four quarters, delivering an average surprise of 4.9%. This is depicted in the graph below.
Before we get into what to expect in the to-be-reported quarter in detail, it’s worth taking a look at MA’s previous-quarter performance.
Q1 Earnings Rewind
In the last reported quarter, the leading global payment solutions company’s adjusted earnings per share of $2.80 beat the Zacks Consensus Estimate by 3.3%. This was primarily driven by improved cross-border travel coupled with an expanding payment network, and value-added services and solutions. However, the upside was partly offset by an escalating operating expense level.
Mastercard’s second-quarter revenues are likely to have benefited from increased travel and entertainment-related spending. MA’s GDV (the dollar volume of activity on Mastercard-branded cards during a particular period, on a local currency basis and U.S. dollar-converted basis) is likely to have benefited from higher usage of its cards, both in the domestic and international markets, in the to-be-reported quarter.
Our estimate for the company’s total GDV for all MA-branded programs is pegged at $2,126.2 billion, suggesting a 3.4% rise from the prior-year quarter’s reported figure. We expect GDV from domestic operations to have increased 4.6% year over year and almost 3% in international operations. Growing strength in Latin American operations is likely to have driven the metric.
Processed transactions are likely to have witnessed a climb due to resilient consumer spending and increased contactless acceptance initiatives pursued by the technology company. Our estimate for the same indicates an increase of more than 14% from the year-ago period’s reading.
Growing cross-border travel is expected to have favored cross-border volumes of Mastercard. Our estimate for cross-border assessments indicates a rise of almost 27% from a year ago. Further, our model predicts domestic assessments and transaction processing assessments to witness a 6.4% and 13.1% year-over-year increase, respectively.
All the above-mentioned factors are likely to have boosted Mastercard’s results for the quarter under review, leading to significant growth from the year-ago levels. Yet, the company is expected to have incurred escalated costs, and higher rebates and incentives in the June quarter, affecting profit growth, making an earnings beat uncertain.
Mastercard’s operating costs are likely to have significantly increased in the second quarter due to higher G&A, advertising, marketing and data processing costs, thereby hurting bottom-line growth. We expect total adjusted operating expenses to increase nearly 13% from the prior-year quarter’s actuals.
Furthermore, our estimate for payments network rebates and incentives suggests a more than 18% year-over-year increase. Also, due to the high interest rate environment, the company’s interest expense figure is likely to have jumped around 30% from the prior-year period.
Earnings Whisper
Our proven model does not conclusively predict 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 not the case here.
Earnings ESP: Mastercard has an Earnings ESP of -1.81%. This is because the Most Accurate Estimate is currently pegged at $2.82 per share, lower than the Zacks Consensus Estimate of $2.87.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Mastercard currently carries a Zacks Rank #3.
Stocks to Consider
While an earnings beat looks uncertain for Mastercard, here are some stocks from the broader Business Services space that you may want to consider as our model shows that these have the right combination of elements to beat on earnings this time around.
The Zacks Consensus Estimate for S&P Global’s bottom line for the to-be-reported quarter is pegged at $3.12 per share, indicating 11% year-over-year growth. SPGI beat estimates in three of the past four quarters and missed once, with an average surprise of 3.1%.
Booz Allen Hamilton Holding Corporation (BAH - Free Report) has an Earnings ESP of +3.20% and a Zacks Rank of 2.
The Zacks Consensus Estimate for Booz Allen’s bottom line for the to-be-reported quarter is pegged at $1.25 per share, which suggests a 10.6% year-over-year jump. BAH beat estimates in all the past four quarters, the average being 10.2%.
Flywire Corporation (FLYW - Free Report) has an Earnings ESP of +6.67% and is a Zacks #2 Ranked player.
The Zacks Consensus Estimate for Flywire’s bottom line for the to-be-reported quarter indicates a 31.8% improvement from the year-ago period. The estimate remained stable over the past week. Furthermore, the consensus mark for FLYW’s revenues is pegged at $74.3 million, predicting a 44.2% year-over-year rise.
Image: Bigstock
Will Rising Expenses Affect Mastercard's (MA) Q2 Earnings?
Mastercard Incorporated (MA - Free Report) is set to report second-quarter 2023 results on Jul 27 before the opening bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for second-quarter 2023 earnings per share of $2.87 has witnessed no upward revisions but four downward movements in the past week. The estimate, however, is indicative of a 12.1% increase from the year-ago reported figure. The consensus estimate for revenues is pegged at $6.2 billion, suggesting a 12.3% jump from the year-ago level.
Mastercard beat estimates in all the trailing four quarters, delivering an average surprise of 4.9%. This is depicted in the graph below.
Mastercard Incorporated Price and EPS Surprise
Mastercard Incorporated price-eps-surprise | Mastercard Incorporated Quote
Before we get into what to expect in the to-be-reported quarter in detail, it’s worth taking a look at MA’s previous-quarter performance.
Q1 Earnings Rewind
In the last reported quarter, the leading global payment solutions company’s adjusted earnings per share of $2.80 beat the Zacks Consensus Estimate by 3.3%. This was primarily driven by improved cross-border travel coupled with an expanding payment network, and value-added services and solutions. However, the upside was partly offset by an escalating operating expense level.
Now let’s see how things have shaped up before the second-quarter 2023 earnings announcement.
Q2 Factors to Note
Mastercard’s second-quarter revenues are likely to have benefited from increased travel and entertainment-related spending. MA’s GDV (the dollar volume of activity on Mastercard-branded cards during a particular period, on a local currency basis and U.S. dollar-converted basis) is likely to have benefited from higher usage of its cards, both in the domestic and international markets, in the to-be-reported quarter.
Our estimate for the company’s total GDV for all MA-branded programs is pegged at $2,126.2 billion, suggesting a 3.4% rise from the prior-year quarter’s reported figure. We expect GDV from domestic operations to have increased 4.6% year over year and almost 3% in international operations. Growing strength in Latin American operations is likely to have driven the metric.
Processed transactions are likely to have witnessed a climb due to resilient consumer spending and increased contactless acceptance initiatives pursued by the technology company. Our estimate for the same indicates an increase of more than 14% from the year-ago period’s reading.
Growing cross-border travel is expected to have favored cross-border volumes of Mastercard. Our estimate for cross-border assessments indicates a rise of almost 27% from a year ago. Further, our model predicts domestic assessments and transaction processing assessments to witness a 6.4% and 13.1% year-over-year increase, respectively.
All the above-mentioned factors are likely to have boosted Mastercard’s results for the quarter under review, leading to significant growth from the year-ago levels. Yet, the company is expected to have incurred escalated costs, and higher rebates and incentives in the June quarter, affecting profit growth, making an earnings beat uncertain.
Mastercard’s operating costs are likely to have significantly increased in the second quarter due to higher G&A, advertising, marketing and data processing costs, thereby hurting bottom-line growth. We expect total adjusted operating expenses to increase nearly 13% from the prior-year quarter’s actuals.
Furthermore, our estimate for payments network rebates and incentives suggests a more than 18% year-over-year increase. Also, due to the high interest rate environment, the company’s interest expense figure is likely to have jumped around 30% from the prior-year period.
Earnings Whisper
Our proven model does not conclusively predict 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 not the case here.
Earnings ESP: Mastercard has an Earnings ESP of -1.81%. This is because the Most Accurate Estimate is currently pegged at $2.82 per share, lower than the Zacks Consensus Estimate of $2.87.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Mastercard currently carries a Zacks Rank #3.
Stocks to Consider
While an earnings beat looks uncertain for Mastercard, here are some stocks from the broader Business Services space that you may want to consider as our model shows that these have the right combination of elements to beat on earnings this time around.
S&P Global Inc. (SPGI - Free Report) has an Earnings ESP of +1.89% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for S&P Global’s bottom line for the to-be-reported quarter is pegged at $3.12 per share, indicating 11% year-over-year growth. SPGI beat estimates in three of the past four quarters and missed once, with an average surprise of 3.1%.
Booz Allen Hamilton Holding Corporation (BAH - Free Report) has an Earnings ESP of +3.20% and a Zacks Rank of 2.
The Zacks Consensus Estimate for Booz Allen’s bottom line for the to-be-reported quarter is pegged at $1.25 per share, which suggests a 10.6% year-over-year jump. BAH beat estimates in all the past four quarters, the average being 10.2%.
Flywire Corporation (FLYW - Free Report) has an Earnings ESP of +6.67% and is a Zacks #2 Ranked player.
The Zacks Consensus Estimate for Flywire’s bottom line for the to-be-reported quarter indicates a 31.8% improvement from the year-ago period. The estimate remained stable over the past week. Furthermore, the consensus mark for FLYW’s revenues is pegged at $74.3 million, predicting a 44.2% year-over-year rise.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.