Mastercard (MA) Q4 Earnings Set To Beat On Higher Revenues

Mastercard Incorporated (NYSE:MA) is expected to report fourth-quarter and full-year 2018 earnings on Jan 31, 2019.

The Zacks Consensus Estimate for earnings is $1.53 per share on revenues of $3.79 billion, which translate into year-over-year growth of 34.2% and 14.4%, respectively.

Factors to Affect Q4 Results

The company's fourth-quarter results should gain from strong retail sales that must have led to higher spending via cards, boosting gross dollar volumes and processed transaction. The Zacks Consensus Estimate for processed transactions is pegged at 19.92 billion, up 12.3% year over year.

We expect revenues in the fourth quarter to gain from an increase in switched transactions, (the number of times a Mastercard account is used to facilitate a purchase) and higher gross dollar volume, which measures the total dollar amount of all transactions across Mastercard's network.

We expect an increase in revenues from the company’s Service 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 $1.56 trillion, up 9.8% year over year.

The strengthening of dollar in the fourth quarter will act as a slight dampener to earnings.

We expect to see an increase in operating expenses from cost related to integration of recent acquisitions, adoption of a new revenue guidance and investments in strategic initiatives.

Nevertheless, shares bought back by the company in the fourth quarter will provide an extra cushion to earnings.

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 8.82%. This is depicted in the chart below:

Mastercard Incorporated Price and EPS Surprise

Why a Likely Positive Surprise?

Our proven model indicates that chances of Mastercard beating the Zacks Consensus Estimate are high, as it has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP for Mastercard is +1.45%.

Zacks Rank: The company currently has a Zacks Rank #3, which increases the predictive power of ESP.

Other Stocks That Warrant a Look

Here are a few finance stocks that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat in the upcoming release.

First Data Corp. (NYSE:FDC) has an Earnings ESP of +6.29% and a Zacks Rank #3. The company is expected to report fourth-quarter earnings on Jan 30. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

TCF Financial Corp. (NYSE:TCF) has an Earnings ESP of +1.5% and a Zacks Rank #3. The company is expected to report fourth-quarter earnings on Jan 30.

Virtu Financial Inc. (NASDAQ:VIRT) has an Earnings ESP of +23.36% and a Zacks Rank #3. The company is expected to report fourth-quarter earnings on Feb 14.

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