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Mastercard Q4 outlook is a little weak after strong Q3 beat, KBW analyst says (NYSE:MA)


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Mastercard’s (NYSE:MA) outlook for Q4 was “a bit below expectations on revenue growth and is potentially driving some weakness in the stock this morning,” KBW analyst Sanjay Sakhrani wrote in a note on Thursday.

MA shares slipped 0.8% in midday trading, and fell as much as 1.7% earlier in regular-hours trading.

The payment network’s Q4 outlook for net revenue growth, at low-end of double digits, fell short of Sakhrani’s estimate of +12.7%. In addition, its outlook for Q4 adjusted operating expense growth in the low end of double-digits came in slightly higher than his estimate of +9%.

Mastercard (MA) Q3 earnings and revenue both exceeded the average analyst estimates as consumer spending remained resilient and cross-border travel continued to recovery.

The Q3 beat was driven primarily by stronger net revenue, the result of stronger gross revenue partly offset by higher incentives, Sakhrani said. “Volume trends were generally in-line with expectations and intra-day quarter trends through October remain constructive, particularly cross-border volumes (ex-intra Europe).”

In its business update through Oct. 21, cross-border volume growth was 36% Y/Y, less than the 44% growth it saw in Q3 2022 and the 38% increase it saw in September 2022. Excluding intra-Europe, cross-border travel volume increased 25%, down from 36% in Q3 and from 28% in September.

Switched volume growth in the month-to-date increased 17% Y/Y, vs. 18% in Q3 but the same rate as September. Meanwhile switched transactions of 9% growth in October, was unchanged from the Q3 rate and ticked up from 8% in September.

On Tuesday, Visa (V) reported fiscal Q4 earnings that beat the Street consensus, increased its dividend, and adopted a new $12B stock buyback program.

SA contributor Quant 7 Capital analyzes Mastercard’s (MA) Q3 earnings and calculates a price for making bigger block purchases.

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