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Mastercard Posts Upbeat Q2 Results as Cross-Border Spending Increases

Story Highlights

Mastercard has cheered its investors with impressive second-quarter earnings results, which were supported by increased cross-border and consumer spending.

Mastercard Incorporated (NYSE: MA) has impressed investors with encouraging second-quarter 2022 earnings results. Following the announcement, shares of the company rose 1.22% in Thursday’s pre-market trade. The strength in cross-border and consumer spending have largely supported the company’s top line in the reported quarter.

The payment company’s adjusted earnings per share came in at $2.56, up from $1.95 a year ago. It also conveniently surpassed the consensus estimate of $2.36 per share.

Revenues for the reported quarter stood at $5.5 billion, up 21% reported and 27% on a constant currency basis. The metric also surpassed the Street estimates of $5.26 billion. The upside in the revenues can be largely attributed to a cross-border volume increase of 58% year-over-year on a local currency basis.

Further, gross dollar volume rose 14% year-over-year on a local currency basis to $2.1 trillion. Switched transactions were also up 12% from the year-ago period.

During the quarter, Mastercard saw a year-over-year rise of 18% reported, or 23% on a currency-neutral basis, in other revenues. The metric includes 3% year-over-year growth due to buyouts. The company’s Cyber & Intelligence and Data & Services solutions contributed to the remaining growth.

The 19% year-over-year increase in rebates and incentives (contra-revenue) can be largely attributed to higher volumes and transactions and new and renewed deals.

The company issued 3 billion Mastercard and Maestro-branded cards to its customers as of the end of the June quarter.

Mastercard repurchased 6.9 million shares at $2.4 billion and paid $477 million in dividends during the reported quarter.

New Bill Spells Trouble

Two U.S. senators, Sen. Dick Durbin, an Illinois Democrat, and Sen. Roger Marshall, a Kansas Republican, are working on a bill that is targeting credit-card fees, according to a Wall Street Journal Report. The bill is aiming to provide merchants the right to process Mastercard and Visa credit cards through unaffiliated networks that charge lower fees.

The report also highlighted that the bill might be introduced this week. There is no doubt that the bill, if cleared, can impact the network fee collected by Mastercard on credit-card transactions.

Wall Street is Optimistic about MA Stock

Overall, the Street is optimistic about the stock and has a Strong Buy consensus rating based on 19 Buys and one Sell. Mastercard’s average price target of $414.11 signals that the stock may surge nearly 20.6% from current levels. Shares of the company have declined 7.1% so far this year.

Further, MA scores an 8 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform the market.

According to TipRanks, financial bloggers are 84% Bullish on Mastercard, compared to the sector average of 66%. The news sentiment is also Positive for the stock.

Key Takeaways for MA Investors

A spurt in leisure and work-related travel has primarily led to the soaring cross-border spending levels, which have supported the company’s top-line growth. Also, despite high inflation levels, consumer spending has remained decent so far. Looking at the key catalysts, which are supporting the stock, investors can consider parking their money in Mastercard to reap handsome returns.

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