Consumer Spending Remains Strong, Boosting Visa and Mastercard Earnings
Overall consumer spending, the backbone of U.S. economic growth, continues to show strength. After a dip in January, U.S. retail sales rebounded in February (0.9% M/M) and March (0.7%). Banks have also observed a robust consumer, with Bank of America reporting a 5% Y/Y increase in combined credit/debit card spending in Q1.
This bodes well for payment network giants Visa and Mastercard, who are poised to release their latest quarterly earnings. Visa will release results for Q2 of fiscal 2024 after the market close on Tuesday. Analysts expect the company to post non-GAAP earnings per share (EPS) of $2.43, up from $2.41 in Q1 and $2.09 in Q2 2023.
Visa’s payment volume is projected to decline slightly to $3.19 trillion, according to Visible Alpha estimates. However, investors should pay more attention to Visa’s guidance for the remaining half of the fiscal year, as this will provide insights into the company’s performance for 2024.
Rival Mastercard is scheduled to release its Q1 results on Wednesday, May 1. Analysts anticipate adjusted EPS of $3.24, compared to $3.18 in Q4 2023 and $2.80 in Q1 2023. Mastercard’s gross dollar volume is expected to decrease to $2.30 trillion, primarily due to the absence of the holiday shopping season.
Over the past 12 quarters, both Visa and Mastercard have consistently exceeded consensus estimates for top and bottom lines. This strong track record gives analysts confidence in the potential upside for both companies in Q1.
