The Financial Transaction Services industry is likely to have benefited from booming digitization, steady consumer spending and improved cross-border volumes in the first quarter of 2023. Technology upgrade expenses and inflationary headwinds might have put pressure on margins of the stocks in discussion. Some of the financial transaction services companies like Mastercard Incorporated MA, Fidelity National Information Services, Inc. FIS and Bread Financial Holdings, Inc. BFH are set to report their quarterly earnings on Apr 27.
The financial transaction services space is housed within the broader Business Services sector (one of the 16 broad Zacks sectors within the Zacks Industry classification). The latest Earnings Preview indicates that the total earnings of business services companies in the first quarter are anticipated to decline 4.5% year over year, while revenues are projected to rise 4.8%.
Factors at Play
In the first quarter, revenues of financial transaction services industry players are likely to have been aided by widespread adoption of digital means across most spheres of life. To capitalize the same, the industry participants have undertaken investments in the form of technology upgrades or partnerships to come up with diversified payment rails, including card offerings or digital payment solutions.
This enables worldwide consumers and businesses to opt for convenient contactless payments on a domestic basis and also across borders. While pursing any transaction, higher utilization of offerings and solutions suite of financial transaction services stocks are expected to have boosted revenues in the to-be-reported quarter.
For devising a modernized digital suite to offer accelerated checkout experiences, the companies in discussion grapple with their own share of worries in the form of high expenses on technology upgrade. To capture a significant share in the market, financial transaction services stocks resort to higher spending on advertisements and promotion. This might have eroded margins of the industry players in the first quarter.
Consumer spending growth is likely to have boosted transaction volumes in the first quarter, which in turn, implies greater usage of card and solutions offering suite possessed by financial transaction services stocks. However, persistent inflationary headwinds and looming recession fears is expected to have taken a toll on the consumer spending ability of consumers.
Growing confidence of people in traveling as a result of the receding pandemic effects might have boosted cross-border travel in the to-be-reported quarter. Thereby, the cross-border volumes of financial transaction services stocks are likely to have received an impetus in the first quarter.
Let’s find out how the following financial transaction services stocks are placed before their first-quarter 2023 earnings on Apr 27.
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Mastercard: Rise in worldwide gross dollar volume (GDV), switched transactions and cross-border volumes are expected to have driven Mastercard’s revenues in the first quarter. Its GDV is expected to have benefited from increased usage of its debit and credit cards both within and outside the United States, while switched transactions are likely to have witnessed an uptick in the quarter on increased issuance of Mastercard-branded cards. However, the upside might be partly dampened by escalating rebates and incentives resulting from increased new and renewed deals.
The Zacks Consensus Estimate for Mastercard’s first-quarter 2023 earnings is pegged at $2.71 per share, which indicates a decline of 1.8% from the prior-year quarter’s reported figure. The consensus mark for revenues is pegged at $5.6 billion, suggesting an 9% growth on a year-over-year basis.
MA has an Earnings ESP of -0.58% and a Zacks Rank #3.
Mastercard’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 10.87%. The same is depicted in the chart below:
Mastercard Incorporated Price and EPS Surprise
Mastercard Incorporated price-eps-surprise | Mastercard Incorporated Quote
Fidelity National: Fidelity National’s quarterly results are likely to have gained momentum in the first quarter on increased investments in mobile banking and product expansion. Recovering cross-border travel might have sustained the solid demand for the FIS e-commerce payment gateway and the new payment platform in the to-be-reported quarter.
The Zacks Consensus Estimate for FIS’s first-quarter 2023 earnings per share and revenues are pegged at $1.20 and $3.4 billion, suggesting a decline of 18.4% and 2.5%, respectively, from the prior-year quarter’s reported figures.
Fidelity National has an Earnings ESP of +0.69% and a Zacks Rank #2.
FIS’s earnings outpaced estimates in three of the trailing four quarters and missed the mark once, the average surprise being 0.62%. The same is depicted in the chart below:
Fidelity National Information Services, Inc. Price and EPS Surprise
Fidelity National Information Services, Inc. price-eps-surprise | Fidelity National Information Services, Inc. Quote
Bread Financial: Its first-quarter revenues are likely to have been aided by favorable consumer spending. Higher average loan balances and new partner additions might have provided an impetus to credit sales of Bread Financial. Escalating technology costs might have weighed on BFH’s performance in the to-be-reported quarter.
The Zacks Consensus Estimate for first-quarter 2023 earnings is pegged at $6.92 per share, suggesting a 64.4% surge from the year-ago quarter’s reported number. The consensus mark for revenues is pegged at $1 billion, indicating a rise of 10.2% from the prior-year quarter’s reported figure.
BFH has an Earnings ESP of +11.70% and a Zacks Rank 3.
Bread Financial surpassed estimates in one of the trailing four quarters, met the same once and missed twice on the remaining two occasions, the average negative surprise being 17.09%. This is depicted in the chart below:
Bread Financial Holdings, Inc. Price and EPS Surprise
Bread Financial Holdings, Inc. price-eps-surprise | Bread Financial Holdings, Inc. Quote
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