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Will Mastercard (MA) Ride on Revenue Growth in Q3 Earnings?

Mastercard Inc.MA is scheduled to report third-quarter 2018 results on Oct 30, before the opening bell. We expect earnings to see an upside from an increase in switched transactions, cross-border volumes and gross dollar volumes. This should be partly offset by a rise in rebates and incentives plus higher operating expenses.

A strong U.S. economy, solid consumer confidence and low unemployment might have led to higher spending via cards, boosting gross dollar volumes and processed transaction in turn. The Zacks Consensus Estimate for processed transactions is pegged at 19.03 billion, up 13% year over year.

We expect an increase in revenues from the company's Service Business, backed by its efforts in expanding this business, which has been delivering strong earnings for the past many years. Higher utilization of the company's service offerings drove revenue acceleration in the previously reported quarter and the same is expected in the quarter to be reported as well.

A lower tax rate owing to the recently passed Tax Cuts and Jobs Act will aid the company's margins.

Among regions, business growth will be seen in Asia, Australia and ASEAN countries, boosted by bullish consumer and business sentiment. The Latin American region, recovering from economic recession, should also contribute to business growth while Europe should witness a mild uptick. The company's global business should expand its worldwide gross dollar volume, which is expected to be $1.07 trillion, up 13.4% year over year.

The strengthening of dollar in the third quarter will act as a headwind to earnings.

On the expense front, the company consistently invests in strategic initiatives such as digital infrastructure, safety and security platforms, data analytics and geographic expansion as well as higher costs related to increased revenues in certain areas like loyalty. These costs might induce higher operating expenses.

Earnings Surprise History

The company boasts an attractive earnings surprise history, having surpassed estimates in each of the trailing four quarters with an average beat of 8.89%. This is depicted in the chart below:

Mastercard Incorporated Price and EPS Surprise

Mastercard Incorporated Price and EPS Surprise | Mastercard Incorporated Quote

Here is what our quantitative model predicts:

Our proven model does not conclusively show that Mastercard is likely to beat on earnings this quarter to be reported. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Earnings ESP: Mastercard has an Earning ESP of -0.94%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Mastercard carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company's negative Earnings ESP leaves surprise prediction inconclusive as the company requires a positive ESP to be confident about an earnings surprise.

We caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies that you may consider as our model shows that these have the right combination of elements to beat estimates this earnings season:

Here are some companies that you may consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

WEX Inc. WEX has an Earnings ESP of +0.15% and a Zacks Rank #2. The company is expected to report third-quarter earnings results on Oct 31.

You can see the complete list of today's Zacks #1 Rank stocks here .

Cardtronics PLC CATM has an Earnings ESP of +3.2% and a Zacks Rank #1. The company is expected to report third-quarter earnings results on Nov 1.

EVO Payments, Inc. EVOP has an Earnings ESP of +1.17% and a Zacks Rank #3. The company is expected to report third-quarter earnings results on Nov 7.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

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Cardtronics PLC (CATM): Free Stock Analysis Report

WEX Inc. (WEX): Free Stock Analysis Report

Mastercard Incorporated (MA): Free Stock Analysis Report

EVO Payments, Inc. (EVOP): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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