Should You Buy Mastercard Before Q1 Earnings? Key Estimates to Note

Core Viewpoint - Mastercard is expected to report first-quarter 2025 results on May 1, 2025, with earnings estimated at $7.57 per share and revenues of $7.13 billion, reflecting a year-over-year earnings increase of 7.9% and revenue growth of 12.3% [1][2] Financial Estimates - The Zacks Consensus Estimate for Mastercard's total revenues in 2025 is $31.59 billion, indicating a year-over-year rise of 12.2% [2] - The consensus estimate for 2025 earnings per share is $15.89, suggesting an increase of approximately 8.8% year-over-year [2] Earnings Performance History - Mastercard has a strong track record of exceeding earnings estimates, having beaten the consensus in each of the last four quarters with an average surprise of 3.3% [3] Earnings Prediction Model - Current indicators do not strongly predict an earnings beat for the upcoming quarter, with an Earnings ESP of -0.05% and a Zacks Rank of 3 (Hold) [4] Key Growth Drivers - The Gross Dollar Volume (GDV) for Mastercard is projected to rise by 8.1% year-over-year, with domestic operations expected to grow by nearly 7% and international operations by 8% [6] - Switched transactions are anticipated to increase by 9.9% year-over-year, driven by resilient consumer spending and enhanced contactless payment initiatives [7] - Cross-border volumes are expected to grow by 14%, with domestic assessments and transaction processing assessments projected to rise by 8.4% and 8.9%, respectively [8] Value-added Services - The Zacks Consensus Estimate for net revenues from Value-added Services and Solutions indicates a 17% year-over-year growth, supported by demand for consulting, marketing services, and loyalty solutions [9] Expense Considerations - Rising expenses, including a projected 13.7% increase in adjusted operating costs and a 10.6% rise in payments network rebates and incentives, may offset growth potential [11] Stock Performance - Mastercard's stock has gained 1.5% year-to-date, outperforming the industry decline of 0.9%, while Visa has increased by 6.8% and American Express has decreased by 10.7% [12] Valuation Metrics - Mastercard is currently trading at a forward P/E of 31.85X, above its five-year median of 31.82X and the industry average of 22.31X, indicating a stretched valuation [16] - In comparison, Visa and American Express are trading at forward P/Es of 27.84X and 16.63X, respectively [17] Strategic Outlook - Despite strong fundamentals and growth potential, the high valuation relative to industry averages raises concerns, particularly in light of rising macroeconomic risks and competitive pressures in the digital payments landscape [18][19]