With Capital One COF recently reporting strong Q2 results, investors will be looking forward to Visa’s V and Mastercard’s MA quarterly reports next week on Tuesday, July 29, and Thursday, July 31, respectively.
While Capital One’s focus is on consumer and commercial lending, Mastercard and Visa are two of the leading payment solution providers, making it an interesting topic of which of these credit card giants may be the better investment as earnings approach.
Mastercard & Visa’s Quarterly Expectations
Based on Zacks’ estimates, Mastercard’s Q2 sales are thought to have increased 15% year over year to $7.99 billion compared to $6.96 billion in the prior period. On the bottom line, Mastercard’s Q2 earnings are expected to rise 13% to $4.05 per share from EPS of $3.59 a year ago. Notably, Mastercard has exceeded the Zacks EPS Consensus for 18 consecutive quarters, most recently topping Q1 earnings expectations by 4.48% in May.
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Reporting results for its fiscal third quarter, Visa’s Q3 sales are expected to be up 11% to $9.87 billion versus $8.9 billion in the comparative quarter. More intriguing, Visa’s Q3 earnings are slated to spike 18% to $2.86 per share from EPS of $2.42 in the prior year quarter. Furthermore, Visa has surpassed the Zacks EPS Consensus for a remarkable 21 consecutive quarters and has at least reached earnings expectations since 2012, most recently topping its Q2 earnings estimates by nearly 3% at the end of April.
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Mastercard & Visa’s EPS Outlook
Magnifying Mastercard and Visa’s exceptional operational performance is that both are expected to post steady EPS growth for the foreseeable future.
Mastercard’s annual earnings are projected to rise 10% in fiscal 2025 and are forecasted to spike another 16% in FY26 to $18.71 per share. Plus, Mastercard’s FY25 and FY26 EPS estimates are slightly up in the last 30 days.
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As for Visa, its annual earnings are now projected to increase 13% in fiscal 2025, with FY26 EPS forecasted to rise another 12% to $12.81. Visa’s FY25 and FY26 EPS estimates are also modestly higher over the last month.
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Stock Performance & Valuation Comparison
Interestingly enough, over the last three years, the performance of Mastercard and Visa stock is virtually the same, with gains of over +65%. This has slightly edged the benchmark S&P 500 while being pleasantly above their Zacks Financial Transaction Services Market’s returns of +45%. That said, Visa stock is up +12% year to date to outpace Mastercard’s +8%.
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Perhaps the deciding factor for some investors is valuation, and Visa stock has a slight edge here in terms of price-to-earnings. At 31X forward earnings, Visa stock is still at a premium to their Zacks Financial Transaction Services Industry average of 15X, but does trade beneath Mastercard’s 35X and is closer to the S&P 500’s 24X.
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Bottom Line
It’s certainly not easy to distinguish which of these credit card giants may be the better investment, as Mastercard and Visa have intriguing growth prospects and are both dominant industry leaders. However, having a slight edge in terms of value and an unprecedented streak of reaching or exceeding earnings expectations, Visa stock sports a Zacks Rank #2 (Buy) at the moment, with Mastercard shares landing a Zacks Rank #3 (Hold).
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Mastercard Incorporated (MA) : Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).