Visa Vs Mastercard: Payments Giants Face An Earnings Stress Test This Week From Geopolitics

• Wall Street expects Visa to post a 12% growth in Q2 revenue to $10.75 billion.
• Meanwhile, Wall Street analysts expect Mastercard to post a growth of about 14%, with Q1 revenue expected at $8.26 billion. 
• Both companies have declined about 10% so far this year.

Credit card giants, Visa Inc. (V) and Mastercard Inc. (MA) are on the retail radar as they gear up to report their quarterly financial results this week amid growing geopolitical risks, especially from the war in the Middle East.

As the payment networks are closely tracked proxies for global consumer spending, investors are likely to watch the results for cues on consumer confidence amid macroeconomic and geopolitical uncertainty.

San Francisco, California-based Visa will report its second-quarter (Q2) earnings on Tuesday, while New York-based Mastercard will post first-quarter (Q1) earnings on Thursday.

Visa, Mastercard Earnings Expectations

In the previous quarter, Visa reported a 15% year-on-year growth in net revenue, driven by consumer spending and a strong holiday season.

Wall Street expects Visa to post a 12% growth in Q2 revenue to $10.75 billion compared to $9.59 billion posted in the corresponding quarter of the previous year. Meanwhile, earnings of $3.1 per share are expected, up from $2.76 a year ago, according to data from Fiscal.ai.

Meanwhile, Mastercard reported an 18% increase in fourth-quarter revenue, fueled by growth in its payment network and value-added services and solutions.

Wall Street analysts expect the company to post a growth of about 14%, with Q1 revenue expected at $8.26 billion. Consensus estimates for earnings per share stand at $4.41 for the quarter, up from $3.73 a year ago, according to data from Fiscal.ai.

Payments Volume Compared

For both companies, payments and cross-border volumes play a key role as it directly impacts revenue.

Visa reported steady growth in payments and cross-border transactions in the previous quarter. Payments volume increased 8% year-on-year for the latest quarter on a constant-dollar basis, while cross-border volume increased 12% over the prior year period. The company also noted that its total processed transactions for the quarter were at 69.4 billion, a 9% increase.

Meanwhile, Mastercard reported that its payment network net revenue rose 12% year over year, or 9% on a currency-neutral basis, and a 14% growth in cross-border volume.

Street Consensus

Last week, both Visa and Mastercard received price target cuts from Truist. The analyst lowered the price target on Visa to $361 from $372 and maintained a ‘Buy’ rating. Meanwhile, for Mastercard, the analyst cut the price target to $590 from $611 and maintained a ‘Buy’ rating.

However, according to data from Koyfin, 39 analysts covering Visa have a 12-month average price target of $392.33 on the shares, indicating an upside potential of about 26.7%.

On Mastercard, the 39 analysts covering the company have a 12-month average price target of $652.69 per share, indicating an upside potential of about 28.8%.

Retail Stance

On Stocktwits, retail sentiment around V stock is the ‘neutral’ territory amid ‘high’ message volumes. For MA stock, retail sentiment is the ‘bearish’ territory amid ‘normal’ message volumes at the time of writing.

Both V stock and MA stock have declined more than 10% so far this year.

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