• The market expects increased earnings on higher revenues
  • Focus on the cross border payments following economies reopening
  • Cryptocurrency prospects on the spotlight

MasterCard will report its second-quarter results on July 29, 2021, amid expectations of an increase in earnings on higher revenues. A solid earnings report could help the stock move higher, having underperformed the overall market.

While the stock is trading near an all-time high, signaling it is up 8%  year to date compared to a 15% gain of the S&P 500 year to date.

MasterCard stock chart

The company is poised to report its Q2 result, having topped earnings in three of the last four quarters. Additionally, it is in a good position to maintain the trend, given the solid underlying fundamentals that have been fuelling its core business.

Economy reopening impact

The payment processing business has been bolstered by the opening of the global economy that has resulted in increased consumer spending. The opening of the global economy has only sparked a surge in payments, all but paving the way for Mastercard to generate significant revenues through transactional fees on its cards.

The global economy opening has been beneficial for the payment company, which came under pressure as the COVID-19 pandemic, triggered a decline in cross-border volumes on the travel restrictions and quarantine requirements that came into play.

Full-year revenues for 2020 were down 9%, driven by lower cross-border payments. Fast forward, the situation has improved following aggressive vaccination campaigns that have resulted in the opening of borders.

Consumers and merchants have embraced digital payments in the aftermath of the pandemic, all but strengthening Mastercard’s revenue base. The emerging trend bodes well with the payment processor, a development that should be clear when it reports.

Q2 earning expectations

Wall Street expects the payment processor to deliver $1.72 share earnings, signaling a 26.5% year-over-year increase. In the last quarter, Mastercard delivered earnings of $1.74 share, topping consensus estimates of $1.55 a share.

MasterCard price and EPS

On the other hand, revenues are expected at $4.36 billion, signaling a 30.8% increase from last year’s same quarter levels.

What to look out for?

Mastercard is home to some of the most widely used cards at the heart of the digital revolution. As more shoppers make payments offline and online, the company remains well-positioned to generate significant revenues in transaction fees.

When Mastercard reports, the focus will be on the impact of the reopening of the global economy. The easing of COVID-19 restrictions has resulted in an uptick in travel.  Consumer spending is believed to have edged higher as cross-border movements improved, resulting in people spending more using their Mastercard debit and credit cards. Therefore, the market will analyze the company’s domestic revenues as well as cross-border volumes.

Additionally, the market will also analyze the company’s endeavors in the cryptocurrency sector. Mastercard has been collaborating with cryptocurrency platforms as it looks to tap into the growing number of consumers entering the burgeoning segment. It has already confirmed plans to allow specific cryptocurrencies on the network as part of the latest drive.

The push into the crypto space is part of the company’s plan that seeks to offer crypto-enabled cards that will allow people to purchase digital assets. The expansion drive can only strengthen its revenue base given the fees it is poised to generate from such cards.

Bottom line

Mastercard is poised to report its Q2 results on spending levels surpassing 2019 levels in the aftermath of the opening of the global economy. While the stock has hit new highs, it has pulled lower ahead of the report, which is likely to sway investor’s sentiments and influence price action.

The company’s core business is expected to continue driving top-line and bottom-line growth as the widespread adoption of digital payments boards well with the business model. Consumer spending edging higher in the second quarter all but affirms the company’s prospects delivering numbers that top estimates on revenues and earnings.