Earnings preview: Pros to outweigh cons when Mastercard posts Q3 results

The payments industry has remained largely unaffected by the tariff-induced trade disruptions and political uncertainties, thanks to the booming economy and people’s spending power. Mastercard (MA), which is slated to report third-quarter results on October 30 before the market opens, bets on that. Analysts see a 25% year-over-year increase in earnings to $1.68 per share, on revenues of $3.86 billion.

The New York-based credit card firm has been doing well in the recent quarters, cashing in on its initiatives to broaden the network of co-branding partners and investments in technology to stay relevant in the digital payment space.

While the growing payments volumes and processed transactions across markets continue to be the main growth drivers, profitability might come under pressure from the high rebates and incentives offered to customers. Also, rising costs and the resultant squeeze on margins remain a challenge. The management has been successful in tapping the new opportunities in the sector and position the company to compete effectively with rival and industry leader Visa (V).

This year, the payment industry as a whole witnessed hectic activity, owing to the improving economic conditions globally and positive consumer sentiment – factors that brighten the prospects of credit card service providers.

Also see: Mastercard Q2 2018 Earnings Conference Call Transcript

In the second quarter, Mastercard’s adjusted earnings climbed to $1.7 billion or $1.66 per share from $1.2 billion or $1.10 per share in the prior-year quarter, benefitting from a 20% growth in revenues to $3.7 billion.

Earlier this week, Visa reported better-than-expected earnings for its fourth quarter, while revenues came in line with the street view. Earnings jumped about 30% to 1.23 per share and revenues gained 12% to reach $5.4 billion. Amex (AXP) posted a 22% growth in earnings for the third quarter when revenues rose 9% to around $10 billion, aided by higher cardmember spending and transaction fees.

Shares of Mastercard dropped in the early trading hours Friday, after closing the previous session sharply higher. The stock, which advanced about 28% since the beginning of the year, peaked in early October.

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