Colossal credit card companies Mastercard (MA) and Visa (V) report earnings results on Thursday. Mastercard topped expectations for its fourth quarter results before the market opened. And Visa kicked off its fiscal 2023 year by beating forecasts for its afternoon report. MA stock fell Thursday and Visa stock rose after hours following its announcement.
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A backdrop of rising interest rates can be a positive for the big credit card processors. But those interest rates also squeeze consumers, who have also grown increasingly wary of a possible recession. Wells Fargo analyst Donald Fandetti expects these factors to make most of 2023 a challenging environment for consumer finance company fundamentals, he wrote in a mid-December research note.
However, easing travel-related concerns and revenue other than consumer credit cards is improving company diversification. Also, additional payment flows outside of consumer cards should extend Visa and Mastercard’s growth, KeyBanc analyst Josh Beck noted on Jan. 9.
On Tuesday, MA stock and Visa stock veered sharply higher and lower amid the New York Stock Exchange’s trading malfunction. Both hit “circuit breakers” and were temporarily halted. MA stock ended Wednesday up 1.6% so far this week, while V stock has edged 0.3% higher in that time.
Mastercard Earnings
Mastercard’s gross dollar volume grew 14% through the first three quarters of 2022, to $6 trillion. The company’s cross-border volume spiked 51% during the year, generating $4.8 billion in cross-border fees.
For the fourth quarter, Mastercard’s adjusted earnings rose 13% to $2.65 per share on 12% revenue growth to $5.8 billion. That just beat Wall Street expectations of 9.4% earnings growth to $2.57 per share on 10.9% revenue growth to $5.79 billion.
For Q4, gross dollar volume grew 8% to $2.1 trillion. Cross-border payments volume leapt 31% $1.8 billion and transaction processing fees rose 12% to $3.3 billion.
The results mark seven consecutive quarters of increasing earnings and eight quarters of revenue growth. However, earnings gains slowed the last four quarters. And sales growth decelerated over the past seven quarters, falling from 36% growth in Q2 2021.
MA stock fell 1.5% Thursday after results. Shares rose 1.2% on Wednesday. Mastercard stock spiked 20% over the past three months and is up 10.5% over the past year. Shares are climbing toward their all-time highs from last February.
Visa Stock, Earnings Results
For the fourth quarter, Visa’s payments volume rose 10% year over year and the number of processed transactions increased 12%. The company’s cross-border volume leapt 36% as international transaction revenue soared 52% to $2.87 billion.
Visa’s first quarter fiscal 2023 earnings and revenue rose for the seventh straight quarter with its Thursday afternoon report. Adjusted earnings jumped 21% to $2.18 per share on 12% revenue growth to $7.9 billion. Wall Street anticipated an 11% earnings increase to $2.01 per share on 9% revenue growth to $7.7 billion.
Total payments volume increased 7% year-over-year and the company’s cross-border volume leapt 22% for the first quarter. Services revenue rose 10% to $3.5 billion and data processing revenue climbed 6% to $3.8 billion. International transaction revenues soared 29% to $2.8 billion.
In mid-December, Visa announced a pledge to invest $1 billion in Africa over the next five years to scale its operations and deepen connections with governments, financial institutions, merchants and other strategic partners. Visa says the investment will help create more inclusive economies across the continent and enable greater access to digital payments.
Visa stock rose 1.5% after hours following its report and was slightly down Thursday prior to earnings. V stock is up 10% over the past three months and 9% over the last year.
You can follow Harrison Miller for more news and stock updates on Twitter @IBD_Harrison.
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