Mastercard’s (MA) buoyant performance expected to continue in Q3

For Mastercard Incorporated (NYSE: MA), 2024 has been a great year so far, with resilient consumer spending amid an improvement in economic conditions driving revenue growth. The ongoing shift from cash to digital transactions is expected to remain a key growth driver for the company, cartelized by macro tailwinds like interest rate cuts. The company is scheduled to publish its third-quarter results on Thursday.

Extending their post-earnings gains a few months ago, shares of the credit card giant gathered momentum and set a new record earlier this month. After withdrawing from the peak, the stock traded almost flat in recent sessions. MA has gained about 16% in the past three months. While the stock looks expensive, the company’s consistent financial performance and strong fundamentals justify the high valuation.

What to Expect

In an indication that the strong performance seen in the first half continued in the third quarter, analysts forecast a double-digit increase in revenue and profit – the top line is expected to grow 22% year-over-year to $7.27 billion in the September quarter, and adjusted profit is seen growing to $3.74 per share from $3.09 per share. The report is slated for release on Thursday, October 31, at 8:00 am ET.

The company’s impressive performance can be attributed to strong network effects, combined with brand power and customer loyalty. It is worth noting that Mastercard has also been expanding its footprint in non-core areas like cybersecurity, data analytics, and fraud prevention. Meanwhile, it faces the risk of losing market share to fintech companies like PayPal, with the services offered by them steadily gaining popularity.

Mastercard’s CEO Michael Miebach said at the Q2 earnings call, “We will invest in opening acceptance and new verticals, and we will continue to apply technology to help us realize even more of the shift to digital across both consumer and commercial. We will also enhance and expand our value-added services, such as in data analytics, fraud, and cybersecurity particularly as we further embed AI into our products and services. As a result of this organizational realignment, which positions us well for long-term growth, we expect to incur a one-time restructuring charge in the third quarter.”

Key Metrics

Estimates for the third quarter are almost in line with the solid results the company delivered in the previous quarter, with revenue growing 11% year-over-year to $7.0 billion and coming in above the Street view. That translated into a 24% increase in adjusted earnings to $3.59 per share in the second quarter. Over the past two years, quarterly earnings regularly beat estimates. Currency-neutral revenue growth was 13% during the three months. Unadjusted profit advanced to $3.3 billion or $3.50 per share in Q2 from $2.8 billion or $3.0 per share last year.

On Monday, Mastercard’s stock opened around $507, well above its 52-week average of $453.82. The shares traded slightly higher in the early hours, shedding the weakness seen last week.