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Earnings preview: Long-term prospects make Mastercard a sure bet

By Staff Correspondent |

Mastercard (MA) has been quite successful in closing the gap with rival and industry leader Visa (V) in recent years, taking advantage of the opportunities offered by the payment solutions sector.  When the company reports its second-quarter results on Thursday before the opening bell, analysts will be looking for earnings of $1.53 per share and revenues of $3.7 billion.

In May, the company surprised everyone by reporting first-quarter earnings that far exceeded estimates, driving the shares to an all-time high. Since then, the stock maintained the steady uptrend and set a fresh record this week in the run-up to the second-quarter earnings release.

Analysts are bullish about the company’s growth prospects, considering the strong performance in international markets and the growing demand for its service offerings. Services have been a closely-watched segment of Mastercard’s business as it keeps coming up with new products such as advertising and analysis of purchase data at retailers, thereby expanding the client base beyond merchants.

The stock maintained the steady uptrend and set a fresh record this week, in the run-up to the second-quarter earnings release

Continuing a trend that started several quarters ago, gross dollar volume remains on an upward trajectory – benefitting mainly from cross-border transactions that fetch higher fees. While the sector continues to benefit from the rapid adoption of electronic payment systems across the world, credit card companies bet on the growing domestic economy and robust job market also. Going forward, business growth will depend a lot on the company’s ability to reach out to customers in new markets.

RELATED: Mastercard shifts focus to digital payments

The main challenge faced by the New York-based card network is high operating expenses, which increased as much as 35% in the last quarter, squeezing margins. Analysts believe GAAP results for the June-quarter will also be impacted by a multi-million fund set aside by the company for settling a long-drawn lawsuit related to card-swipe fees.

After gaining 38% since January this year, Mastercard stock opened Tuesday’s regular session significantly higher and hit an all-time high. Rival Visa, which will be reporting results for its most recent quarter on July 25, is witnessing a similar trend in the movement of its stock, which jumped to an all-time high last week.

RELATED: Mastercard Q1 results 

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