Visa and Mastercard See Q3 Earnings Gains, But Their Stocks Fall

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The two largest payment processors, Visa (NYSE:V) and Mastercard (NYSE:MA), both posted earnings gains in the most recent quarter and beat consensus estimates, but their stocks were dropping in Thursday-morning trading.

Mastercard, which released third-quarter earnings Thursday morning, was down by about 4.3% on Thursday at 10 a.m. Eastern to around $370 per share, while Visa, which issued quarterly earnings Tuesday, was off 1.3% to roughly $235 per share.

Mastercard buoyed by international travel

The fiscal third-quarter numbers for Mastercard did not disappoint, nor did they appear to lend themselves to the stock dropping like it did on Thursday. The company posted a 14% year-over-year revenue increase in the quarter to $6.5 billion, while net income climbed 28% to $3.2 billion, or $3.39 per share. Mastercard’s earnings beat estimates, while its revenue was in line with consensus projections.  

Revenue from its payment network increased 12%, with most of the gains coming from cross-border volume growth, which grew 21%. This was due in large part to increases in international travel spending.

The volume of switched transactions, which are those that are authorized, settled and cleared on its network, was 15% higher year over year. Overall gross dollar volume coming across on its network increased 11% to $2.3 trillion. Additionally, revenue from Mastercard’s value-added services business jumped 17% in the quarter, led by growth in its cyber and intelligence solutions.

“We delivered strong revenue and earnings growth again this quarter, reflecting the solid fundamentals of our business and the continued resilience in consumer spending,” CEO Michael Miebach said. “While macroeconomic and geopolitical uncertainty remains elevated, our diversified business model positions us well to capitalize on the substantial opportunities in payments and services.”

So why was the stock falling on Thursday morning? It was likely related to the fact that Mastercard posted numbers through the first three weeks of Q4 that showed a slight downtick in spending. Switched volume was up 11% year over year for the first three weeks of Q4 through Oct. 21, compared to the 14% increase a year ago. Meanwhile, switched transactions were up 12% compared to 15% last year. Further, cross-border volume was up 20% for the same period, compared to 21% a year ago.

Visa stock also drops

Visa released its fiscal first-quarter 2024 earnings on Tuesday, also reporting robust earnings and revenue gains. However, its stock price was also falling on Thursday, probably from being associated with the negative consumer sentiment around Mastercard.

In the quarter, Visa saw its revenue rise 11% year over year to $8.6 billion, while its net income surged 19% to $4.7 billion, or $2.27 per share.

Visa posted an overall 9% increase in payment volume on its network in the quarter, led by a 16% increase in cross-border volume and a 10% jump in processed transactions. For the full fiscal year, revenue was up 11% while earnings rose 15% to $17.3 billion, or $8.28 per share. Payment volume rose 9% for the full year, while cross-border volume climbed 20% and processed transactions increased 10%.

“Throughout the year, we have seen resilient consumer spending, ongoing recovery of cross-border travel spend versus 2019, and continued growth across our new flows and value-added services businesses. As we enter a new fiscal year, I am confident in our ability to deliver against a backdrop of geopolitical and economic uncertainty,” Visa CEO Ryan McInerney said.

Should you be concerned?

Todayʻs market decline for both of these stocks seems overblown. While economic uncertainty remains, the gross domestic product (GDP) grew by a better-than-expected 4.9% in the third quarter, according to the Commerce Department report on Thursday.

Consumer spending led this gain, according to the report. There are also concerns about what the Federal Reserve will do next week, but last month, Fed Chair Jerome Powell said a “soft landing” was possible, meaning inflation could come down without a recession.

The payment giants may also be hurt somewhat by the Fed’s proposal to cap debit-card fees, but analysts at Bank of America said they didnʻt see a material impact on Mastercard or Visa from it.

Thus, long-term investors shouldnʻt be too concerned about todayʻs volatility.