The two giant card payment networks take centerstage on Thursday, with Mastercard (NYSE:MA) reporting its Q4 2022 earnings before the market opens and Visa (NYSE:V) posting its fiscal Q1 FY2023 results after the closing bell.
Both companies’ results are likely to be affected slower growth in consumer spending. That moderation has already been reported by Visa (V) and Mastercard’s (MA) largest issuing banks, Evercore ISI analyst David Togut said in a recent note. Consumer credit and debit card volumes rose 7% Y/Y in CYQ4 2022, down from 11% growth in CYQ3, he added. Bank of America (BAC), specifically, pointed to card volume growth of 5% Y/Y in Q4, down from 9% growth in the previous quarter.
Note that December retail sales dropped 1.1% in December, more than expected.
Mastercard (MA) is expected to earn $2.58 per share on an adjusted basis in its latest quarter, according to the average analyst estimate, down from the $2.68 it reported for Q3 2022 and up from $2.35 in Q4 2021. Revenue consensus of $5.80B compares with $5.76B in Q3 and $5.22B in Q4 2021.
Evercore’s Togut sees potential for an upside surprise on Mastercard’s (MA) revenue growth. “Notably for 4QCY22E, MA expected 6-7% FX headwinds, which now appears elevated given December weakness in the US dollar. For 4QCY22, we estimate 5-6% FX revenue headwinds,” he wrote.
Baird analyst David Koning sees Mastercard’s Q4 revenue and EPS modestly beating consensus and 2023 guidance to be in-line. “The main component of beat relative to consensus seems to be transaction revenue,” he said.
Analysts have lowered their expectations in the past six months, with MA’s Q4 EPS consensus slipping 4.1% and revenue consensus down 2.6%.
Gross dollar volume is expected to increase to $2.21T, according to the Visible Alpha consensus, up from $2.07T in Q3 and from $2.11T in Q4 2021.
Wall Street expects Visa (V) to earn $2.01 for its first quarter (ended Dec. 31, 2022) of fiscal 2023, up from $1.87 in Q4FY2022 and from $1.70 in the year-ago quarter; its Q1 EPS consensus has slipped only 0.6% in the past six months. Revenue consensus is $7.70B, which has crept down 1.5% in the past six months, compares with $7.55B in the prior quarter and $6.79B in the year-ago period.
Visa (V) Q1 total payments volume are expected to top $3.1T, according to Visible Alpha, up from $2.93T in Q4 2022.
Evercore’s Togut expects Visa’s (V) F1Q23 to outperform its guidance for nominal dollar net revenue growth in the high single digits range, with client incentives on par with F4Q22. As with Mastercard (MA), the weakening U.S. dollar could also contribute to a Q1 beat. He sees a 4% FX headwind for the quarter vs. management’s initial estimate of 5%.
On Tuesday, Togut trimmed his Q4 EPS estimate for Mastercard (MA) by $0.02 to $2.63 and his Q1 EPS estimate for Visa (V) by $0.01 to $2.04.
Looking ahead, Oppenheimer analyst Dominick Gabriele also sees potential for less FX headwind than previously expected at Visa (V) and Mastercard (MA). However, inflation in 2023 and 2024 is likely to limit those benefits, he said. He sees both stocks as strong defensive plays and names Visa as one of his top picks.
In Wednesday midday trading, Visa (V) shares slipped 0.6% and Mastercard (MA) edged down 0.3%.
SA contributor Daniel P. Varga looks at which is the better buy — Mastercard (MA) or Visa (V) — ahead of earnings.