What Will Drive Mastercard’s Third-Quarter Earnings?

Third-quarter expectations

Mastercard (MA) is scheduled to report its third-quarter 2018 results on October 30. Analysts project a substantial YoY (year-over-year) increase in the company’s top-line and bottom-line results. Its improved expectations are primarily driven by the strong economy, higher payments volume, and elevated spending. The improvement could be partially offset by a strong dollar and ongoing trade war concerns.

Wall Street expects the payment processing company to report EPS of $1.68, which signifies a YoY increase of 25.4%. Its revenues are projected to increase 13.7% YoY to $3.86 billion.

What Will Drive Mastercard’s Third-Quarter Earnings?

Factors at play

An improving GDP growth rate, a healthy job environment, and a steady increase in wages have fueled a rise in retail spending. This spending uptrend has benefited payment processing companies such as Mastercard. Moreover, the rapid adoption of digital payment solutions worldwide due to mobile and Internet penetration are anticipated to continue driving Mastercard’s payment volumes.

The steady adoption of digital payment solutions in emerging economies such as India, Brazil, and Mexico aided Mastercard’s growth, as these governments are focusing on developing card acceptance infrastructure. Mobile and Internet penetration and integration with e-commerce have changed the landscape of the payment processing marketplace.

Peers’ expectations

Similar to Mastercard, Wall Street expects other payment processing companies (IPAY) to report robust YoY EPS growth. Visa (V), the company’s arch-rival, is slated to report fourth-quarter results on October 24. Analysts project Visa’s quarterly EPS to come at $1.20, signifying a YoY increase of 33.3%.

American Express (AXP) and Discover Financial Services (DFS), two of Mastercard’s other peers, are expected to report third-quarter EPS of $1.76 and $2.05, respectively. Estimates for the quarter signify YoY increases of 17.3% and 35.8% for the respective companies.

In this series, we’ll study the factors that could drive Mastercard’s top-line and bottom-line results in the third quarter, strategic investments, and long-term valuations.