Yahoo Finance Time to Buy Visa or Mastercard's Stock After Earnings?
Following Mastercard’s MA Q2 report on Wednesday, we now have the most recent financial insight into the major credit card companies with Visa V reporting its quarterly results last week.
Let’s see how these payment service leaders are faring in the current economic environment and if it's time to buy Visa or Mastercard stock.
Visa’s Q3 Results
Last Tuesday, Visa reported results for what was its fiscal third quarter stating its key business drivers were relatively stable as payments volume increased by 7% with cross-border volume spiking 14%. Total processed transactions and revenue rose 10% respectively with Q3 sales at $8.9 billion compared to $8.12 billion in the comparative quarter. This slightly missed Q3 sales estimates of $8.91 billion.
Visa was able to exceed bottom line expectations with Q3 EPS expanding 12% year over year to $2.42 and topping estimates of $2.41 per share. Notably, Visa has surpassed earnings expectations for 18 consecutive quarters posting an average EPS surprise of 2.9% in its last four quarterly reports.
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Mastercard's Q2 Results
Like Visa, Mastercard saw a sharp increase in cross-border volume growth last quarter which rose 17%. Mastercard attributed stronger consumer spending to a solid labor market and wage growth. Standing out in particular was valued added services and solutions net revenue which climbed 19%.
Overall, Mastercard’s Q2 sales rose 10% to $6.96 billion which edged estimates of $6.84 billion. Earnings of $3.59 per share came in 2% better than expected and soared 24% from EPS of $2.89 in Q2 2023. Mastercard has surpassed earnings expectations for 15 consecutive quarters posting an average EPS surprise of 3.49% in its last four quarterly reports.
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Growth Comparison
Based on Zacks estimates, Visa’s total sales are now expected to expand 9% in fiscal 2024 with its top line projected to grow another 10% in FY25 to $39.32 billion. Even better, annual earnings are expected to rise 13% this year and are projected to increase another 12% in FY25 to $11.08 per share.
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Turning to Mastercard, total sales are projected to increase 11% in FY24 and are expected to expand 12% in FY25 to $31.23 billion. More impressive, 16% EPS growth is now expected this year with Mastercard’s annual earnings forecasted to jump another 15% in FY25 to $16.48 per share.
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Valuation Comparison (P/E)
At current levels, Visa's stock trades at 26.8X forward earnings which is beneath Mastercard's 32.5X although both are at premiums to the S&P 500’s 23.3X.
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Recent Price Performance
Year to date, Visa’s stock is only up +1% while Mastercard shares are virtually flat. However, Visa is still sitting on +12% gains over the last year with Mastercard up +18% but both have trailed the S&P 500’s +23%.
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Takeaway
Visa and Mastercard’s stock both land a Zacks Rank #3 (Hold). While the YTD price performance of these credit card giants has been subpar their growth trajectories are very attractive which should support long-term investors. Following their quarterly reports more short-term upside will mostly likely depend on the trend of earnings estimate revisions in the coming weeks.
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Mastercard Incorporated (MA) : Free Stock Analysis Report
Visa Inc. (V) : Free Stock Analysis Report
