Mastercard Earnings: Strong Quarter as Consumer Spending Holds Up

Key Morningstar Metrics for MasterCard

• Fair Value Estimate: $500.00
• Morningstar Rating: ★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of MasterCard’s Earnings

Mastercard’s MA second-quarter results held strong, with management noting that consumer spending is holding up for now, echoing comments from its peer Visa.

Why it matters: On a constant-currency basis, Mastercard’s net revenue grew 16% year over year, roughly in line with what the company has done the past couple of quarters.

• Constant currency purchase volume and transactions both grew 10% year over year, and growth in both metrics was roughly in line with the previous quarter.
• Over the past couple of years, Mastercard has been enjoying a tailwind from a bounce-back in post-covid travel, but that appears to be coming to an end. Constant-currency cross-border volume, excluding intra-Europe transactions, which are priced similarly to domestic transactions, grew by 13% year over year in the quarter, down from 16% in the previous quarter. We saw a similar trend at Visa and think cross-border volume is basically fully normalized. Additionally, there could be some downside risk in the near term.

The bottom line: We maintain our $500 per share fair value estimate for the wide-moat company and see the shares as modestly overvalued.

• While consumer spending is holding up for now, we believe tariffs could create near-term uncertainty and think that the market is more focused on the current positive trends as opposed to the possibility of a downturn.
• Adjusted operating margins improved 50 basis points year over year, and margin improvement this year has been roughly in line with our long-term expectations.