Mastercard Stock: the Company Is in Good Position to Beat Q4 Estimates 

Mastercard Stock

On January 26, before the opening bell, Mastercard Incorporated (NYSE:MA) is planning to reveal the company’s financial results for the fourth quarter of 2022. Mastercard stock has gained 9.5% so far this year.

Q4 Estimates

The Consensus Estimate for Mastercard’s earnings per share for the fourth quarter is now pegged at $2.56, which represents an increase of 8.9% from the reported figure for the same period in the prior year. The consensus mark and our own estimate are the same.

The current consensus mark for revenues is at $5.8 billion, which indicates a growth of 10.4% from the reported number for the same quarter a year earlier. This result is in line with our prediction.

Mastercard has a remarkable history of pleasantly surprising investors with their earnings. In each of the most recent six quarters, its bottom line results were better than expected. While the Dow Jones fell 2% in the past year, Mastercard stock did pretty well, with a return of 8.8%.

Mastercard has an Earnings ESP of +0.36% since the Most Accurate Estimate of $2.57 is pegged higher than the Consensus Estimate of $2.56. This is because the Most Accurate Estimate is based on more historical data. 

Important Considerations

It is anticipated that Mastercard’s revenue will increase in the fourth quarter due to an increase in both the worldwide gross dollar volume (GDV) and switched transactions, in addition to a comeback in cross-border volume transactions. It’s possible that MA’s quarterly success was helped by robust consumer spending, despite ongoing inflationary challenges.

According to the most recent earnings call, the net sales growth on a year-over-year basis is projected to lie at the high end of a mid-teens rate in the fourth quarter. This projection is based on a currency-neutral basis and excludes the effects of acquisitions.

It is anticipated that Mastercard’s GDV, which refers to the dollar volume of activity on Mastercard-branded cards during a particular period, on a local currency basis as well as a U.S. dollar-converted basis, will have benefited from an increase in the usage of its debit and credit cards both within and outside the United States in the quarter that will be reported. It is anticipated that increased consumer confidence in traveling has served as a driving force behind the growth in Mastercard’s GDV.

The Consensus Estimate for Mastercard’s total GDV for all Mastercard-branded programs is now at $2.2 billion. This represents a 3.3% increase from the reported figure for the same quarter in the prior year’s financial report.

The number of switched transactions, which refers to the number of transactions begun and switched across Mastercard’s network, grew during the fourth quarter due to an increase in the issuing of Mastercard-branded cards. It’s possible that Mastercard’s pursuit of contactless acceptance initiatives contributed to the company’s strong quarterly results. The average estimate for switched transactions points to a growth of 10.3% compared to the amount recorded in the same quarter the previous year.

The recovery of expenditure on international travel, together with the easing of limitations at international borders, is likely what drove the international volumes of Mastercard.

However, the development of its top line could be partially hampered by greater rebates and incentives due to growing volumes and transactions along with new and renewed deal activity in the quarter that will be reported.

Additionally, Mastercard’s operating costs likely grew during the fourth quarter due to increased expenses incurred in acquisitions and increasing personnel costs. It’s possible that MA’s margins suffered directly from their increased expense level.

During the most recent earnings call, management shared their expectation that operating expenses will increase by a low double-digit percentage year over year in the fourth quarter. This rise is expected to occur on a currency-neutral basis and exclude acquisitions and special items.

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About the author: Stephanie Bedard-Chateauneuf has over six years of experience writing financial content for various websites. Over the years, Stephanie has covered various industries, with a primary focus on tech stocks, consumer stocks, health stocks, and personal finance. This stock lover likes to invest for the long-term. Stephanie has an MBA in finance.