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MasterCard Inc. shares are up 1.5% in premarket trading on Thursday after the payments giant delivered better-than-expected results for its second quarter even as revenue and earnings declined due to weaker consumer spending during the pandemic.
MasterCard shares are up 3% from the beginning of the year but are still down 10.9% from their 52-week high of $347.25 set on February 20. They are outperforming the S&P 500 which is up 0.9% from the start of the year.
Net revenue was down 19% from a year earlier with two percentage points of that decline attributable to foreign exchange factors. Gross spending on the company’s cards was down 10% worldwide but spending in the U.S. held up much better than in the rest of the world, falling only 5% as opposed a 12% drop internationally. Fees from cross-border payments halved to more than $637 million.
The company saw second-quarter net revenue drop to $3.34 billion from $4.11 billion a year before. The consensus estimate was for $3.25 billion. MasterCard’s gross dollar volume for the quarter dropped 10% while cross-border volume fell 45%.
The company posted net income of $1.4 billion or $1.41 a share, down from $2.05 billion or $2 a share, in the year-prior quarter. MasterCard’s adjusted earnings per share fell to $1.36 from $1.89, while analysts had been expecting $1.16.
Earnings per share of $1.36 on revenue of $3.34 billion were still both above forecasts by analysts, who have underestimated the company’s performance every quarter for at least the last two years.
While overall revenue declined as the COVID-19 crisis crimped consumer spending, MasterCard said that it saw other revenues climb 12% or 14% on a currency-neutral basis. The other revenues category saw a 4 percentage point benefit from acquisitions and the remaining 10% of the growth came mainly from the company’s cyber intelligence and data services, according to MasterCard’s release.
Optimism had been rising after the credit card firms reported a rebound in use amid a relaxation in social distancing rules and fiscal stimulus. However, there are concerns the economic recovery could end up stalling due to resurgence in Coronavirus cases and restrictions.
MasterCard stock’s sustained performance has won it a spot on the IBD Long-Term Leaders list. In a nutshell, an IBD Long-Term Leader is a stock with stable earnings, stable price performance, and high-quality institutional sponsorship that will outperform the market.
On the technical front, the RSI is at 50.50% and suggests that the market can move in an upward direction. The current price is trading above all the moving averages. The stochastic is forming an upside crossover.
Overall Bias is Positive and Short-term trades can be initiated with below mentioned Stop Loss and Profit targets.
Trade Suggestion—MASTERCARD INC—BUY at $304.25 Take Profit at $312.50 Stop Loss at $299.50