Mastercard (NYSE: MA) is scheduled to report its fiscal Q2 2022 results on Thursday, July 28. We expect Mastercard to top the consensus estimates of revenues and earnings. The company outperformed the expectations in the last quarter, with net revenues (revenues minus rebates & incentives) of $5.2 billion – up 24% y-o-y. It was because of a 17% growth in the gross-dollar volume (GDV), a 53% rise in the cross-border volume, and a 22% increase in the number of switched transactions. We expect the same trend to continue in the second quarter.
Our forecast indicates that Mastercard’s valuation is $405 per share, which is 18% above the current market price of around $344. Our interactive dashboard analysis on Mastercard’s Earnings Preview has more details.
(1) Revenues expected to edge past the consensus estimates
Mastercard’s revenues (net revenues) increased 23% y-o-y to $18.9 billion in 2021, driven by growth in all the revenue streams.
- The cross-border volume, which suffered in 2020 due to lockdown restrictions, grew 32% y-o-y in 2021. It resulted in a 33% rise in cross-border volume fees. Further, the volume improved 53% in the first quarter of 2022 and we expect the growth momentum to continue in the second quarter as well.
- The gross dollar volume (GDV) increased 24% y-o-y in 2021, resulting in a 23% growth in the domestic assessment revenues. Further, the Q1 2022 results were on similar lines and we expect the second-quarter results to follow it too.
- The transaction processing fees improved by 24% in 2021 driven by a 25% rise in the number of switched transactions. The same pattern was visible in the first quarter of 2022 and is expected to continue in Q2.
- Overall, we estimate Mastercard’s net revenues to remain around $21.9 billion for full-year 2022.
Trefis estimates Mastercard’s fiscal Q2 2022 net revenues to be around $5.42 billion, 3% above the $5.26 billion consensus estimate.
(2) EPS is likely to beat the consensus estimates
Mastercard Q2 2022 adjusted earnings per share (EPS) is expected to be $2.47 per Trefis analysis, almost 5% above the consensus estimate of $2.35. The company’s net income margin improved from 42% to 46% in 2021, leading to an adjusted net income of $8.7 billion – up 36% y-o-y. Further, the adjusted net income rose by 44% y-o-y to $2.6 billion in Q1 2022. It was partly due to revenue growth and partly due to lower expenses as a % of revenues. We expect the same trend to continue in the second quarter. Overall, Mastercard is likely to report an annual EPS of $10.36 for FY2022.
(3) Stock price estimate is 18% more than the current market price
We arrive at Mastercard’s valuation, using an EPS estimate of around $10.36 and a P/E multiple of just above 39x in fiscal 2022. This translates into a price of $405, which is 18% above the current market price of around $344.
Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year
With inflation rising and the Fed raising interest rates, Mastercard has fallen 4% this year. Can it drop more? See how low can Mastercard stock go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.
|S&P 500 Return||5%||-17%||77%|
|Trefis Multi-Strategy Portfolio||10%||-16%||235%|
 Month-to-date and year-to-date as of 7/25/2022
 Cumulative total returns since the end of 2016