Mastercard Incorporated (NYSE:MA) is set to release its third-quarter 2024 earnings on October 31 before the market opens. Analysts anticipate growth, with the Consensus Estimate pegged at $3.73 earnings per share, marking a 10% increase year-over-year. As investors look to these numbers for guidance, we analyze Mastercard stock potential and whether its performance supports a buy or hold strategy.

Anticipated Revenue and Earnings Growth

Mastercard’s revenue for the third quarter is estimated at nearly $7.3 billion, an 11% rise from last year. Mastercard has consistently exceeded earnings expectations over the last four quarters, averaging a 3.5% surprise. Analysts believe that strong consumer spending, particularly in travel and entertainment, combined with increased cross-border transactions, will boost the quarter’s performance.

Positive Indicators for Q3 Earnings Beat 

The Most Accurate Estimate currently sits at $3.75 per share, which is higher than the consensus, suggesting that Mastercard stock’s upward momentum may continue through the rest of 2024. Mastercard’s sustained growth is largely driven by an increase in Gross Dollar Volume (GDV) as more consumers use their cards domestically and internationally.

Sector Insights: Cross-Border and Domestic Spending Trends 

Mastercard’s growth is anchored in international spending, particularly in Latin America and Europe. The Consensus Estimate indicates a 10% GDV increase from Q3 2023, with a 7.1% increase in domestic spending and a 12.4% boost in international spending. Mastercard’s cross-border travel segment, anticipated to increase by 17.9%, reflects a resurgence in travel demand post-pandemic.

Meanwhile, an expected 9.7% rise in processed transactions underscores Mastercard’s investment in contactless payment options. Enhanced consumer spending and digital payment acceptance appear to be central drivers of Mastercard’s transaction volumes and service expansion.

Expense Outlook: Potential Headwinds 

Despite robust revenue projections, Mastercard’s third-quarter expenses may partially offset earnings growth. Rising operating costs, primarily in general and administrative expenses, and higher marketing costs are expected to elevate the company’s total operating expenses by 11.2% compared to last year. Furthermore, rebates and incentives for payments are projected to climb by 17.1% year-over-year, impacting net profitability.

Visa and Industry Peers

Mastercard stock’s performance stands out against its peers, with the stock up 19.2% year-to-date, outperforming industry giants like Visa (NYSE:V), up by 9.2%, and Euronet Worldwide (NASDAQ:EEFT), which gained just 0.1% over the same period. However, Mastercard slightly trails the broader S&P 500, which saw a 22.2% rise. Mastercard stock’s forward price-to-earnings ratio of 31.29 remains above the industry average of 23.64, signaling investor confidence but raising valuation concerns.

Long-Term Value and Strategic Positioning

Mastercard has established itself as a leader in payment technology with an extensive global footprint. Recent advancements in technology, coupled with strategic acquisitions and partnerships, position Mastercard for continued expansion. The company’s robust cash flow and reserves provide it with the flexibility for shareholder rewards through dividends and stock buybacks, contributing to a favorable long-term outlook.

Should You Buy or Hold Mastercard Stock? 

Mastercard’s anticipated Q3 earnings beat reflects strong fundamentals, with rising cross-border volumes and value-added services contributing positively to revenue. Despite increased operating expenses, Mastercard’s resilient revenue streams and strategic expansions offer promising growth. As the stock prepares for another potential earnings beat, investors considering Mastercard stock as a buy should weigh its sustained growth potential against its elevated valuation.

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