Is Mastercard Stock a Buy Before Q4 Earnings? Check Key Estimates

Core Viewpoint - Mastercard is expected to report fourth-quarter 2024 results on January 30, 2025, with earnings estimated at $3.68 per share and revenues of$7.38 billion, reflecting a year-over-year growth of 15.7% in earnings and 12.8% in revenues [1][2]. Financial Performance - The Zacks Consensus Estimate for Mastercard's total revenues in 2024 is $28.06 billion, indicating an 11.8$14.47, suggesting an 18% rise [3]. - Mastercard has a history of exceeding earnings estimates, achieving an average surprise of 3.2% over the last four quarters [3]. Earnings Predictions - The fourth-quarter earnings estimates have been revised downward by a penny recently, and the current model indicates a negative Earnings ESP of -0.11% with a Zacks Rank of 3 (Hold), suggesting uncertainty in achieving an earnings beat this time [4]. - Revenue growth is anticipated due to increased spending in travel and entertainment sectors, with Gross Dollar Volume (GDV) expected to rise by 8.9% year-over-year [6][7]. Transaction Metrics - Switched transactions are projected to increase by 10% year-over-year, driven by resilient consumer spending and enhanced contactless payment initiatives [8]. - Cross-border assessments are expected to grow by 19.9% year-over-year, with domestic assessments and transaction processing assessments anticipated to rise by 11.5% and 12.2%, respectively [9]. Value-Added Services - The Zacks Consensus Estimate for Value-added Services and Solutions net revenues indicates a 17.2% year-over-year growth, driven by demand for consulting, marketing services, and loyalty solutions [10]. Cost Considerations - Rising expenses, including a projected 13.8% increase in adjusted operating costs and a 19% rise in payments network rebates and incentives, may offset revenue growth and impact profitability [11][12]. Stock Performance - Mastercard's stock has increased by 21.1% over the past year, underperforming the industry growth of 23.9% and lagging behind peers like Visa and American Express [13]. Valuation Insights - The company's current valuation is stretched, trading at 32.45X forward 12-month earnings, above its five-year median of 31.67X and the industry's average of 25.46X [16]. - In comparison, Visa and American Express are trading at lower multiples, suggesting better value opportunities in those stocks [17]. Strategic Positioning - Mastercard is well-positioned for long-term growth through digital innovation and expansion in emerging markets, supported by a strong cash position for share buybacks and dividends [18][20]. - However, short-term challenges such as rising costs, regulatory pressures, and ongoing lawsuits may limit margin growth [21].