The financial transaction services industry is likely to have benefited from a recovering economy, accelerated adoption of digital means, improved consumer spending, rebounding cross-border volumes and substantial technology advancements in the first quarter of 2022. Some of the financial transaction services companies like Mastercard Incorporated MA, The Western Union Company WU and Bread Financial Holdings, Inc. BFH, are set to report their respective first-quarter earnings on Apr 28.
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 first-quarter 2022 are projected to improve 7.8% year over year, while revenues of these companies are expected to jump 11.6%.
Factors Likely to Influence Financial Transaction Services Stocks in Q1
Revenues of players in the financial transaction services space are likely to have received a boost in the first quarter from the ongoing trend of digitization in every sphere of life. In order to stay ahead of the curve, the industry participants have tried every possible effort to strengthen their digital solutions suite through partnerships with renowned organizations or substantial investments. Increasing Internet penetration and higher smartphone usage across various parts of the globe are driving people’s inclination toward contactless payment methods. Increased utilization of digital solutions while pursuing any transaction is likely to have contributed to the revenue growth of these companies.
The quarterly performance of the stocks in discussion might have been driven by a gradual economy recovery, which paved the way for resumption of business activities and improved consumer spending. Massive vaccination programs undertaken worldwide have been accelerating the recovery process.
Uptick in consumer spending resulting from higher pent-up demand and increased personal savings made during the pandemic is likely to have bolstered the transaction volumes of the financial transaction services stocks in the quarter under review. In fact, these companies have left no stone unturned in providing convenience to customers in making payments through enhanced portfolios comprising debit and credit card offerings, buy now, pay later (“BNPL”) solutions, to name a few.
Relaxations of border restrictions by several countries have led to rebounding cross-border travel, which in turn, might have aided cross-border volumes of companies in the financial transaction services space, those that engage in global money transfers. However, a surge in Omicron (a COVID variant) cases may have somewhat dampened cross-border levels in the first quarter.
Even though the companies in discussion have frequently resorted to substantial investments for pursuing technology upgradation to sustain their competitive edges, these costs might have weighed on their margins in the quarter under review.
Let’s take a sneak peek into how the following financial transaction services companies are poised prior to their first-quarter 2022 earnings on Apr 28.
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Mastercard: Improved worldwide gross dollar volume (GDV), higher switched transactions and a continuous recovery in cross-border volumes are likely to have contributed to Mastercard’s first-quarter revenues. The quarterly performance of MA is likely to have benefited on the back of improved consumer spending stemming from a gradual global economic recovery, higher pent-up demand and increased personal savings. (Read more: Factors Setting the Tone for Mastercard’s Q1 Earnings)
The Zacks Consensus Estimate for Mastercard’s first-quarter earnings per share of $2.17 indicates an increase of 24.7% from the year-ago quarter’s reported figure. The consensus mark for revenues is pegged at $4.9 billion, suggesting 18% growth year over year.
MA has an Earnings ESP of -0.28% and a Zacks Rank #3.
Mastercard’s earnings outpaced estimates in each of the trailing four quarters. The same is depicted in the chart below:
Mastercard Incorporated Price and EPS Surprise
Mastercard Incorporated price-eps-surprise | Mastercard Incorporated Quote
Western Union: It has been undertaking heavy investments to boost its digital money transfer arm and building a leading omni-channel platform for a while now, which might have provided a cushion to its first-quarter results. The largest segment of Western Union – Consumer to Consumer (C2C) is likely to have suffered lower transactions in the to-be-reported quarter.
The Zacks Consensus Estimate for Western Union’s first-quarter earnings per share is pegged at 44 cents, which remains unchanged from the prior-year quarter’s reported figure. The consensus estimate for revenues stands at $1.2 billion, indicating a decline of 4.8% year over year.
Western Union has an Earnings ESP of -1.95% and a Zacks Rank #3.
WU’s earnings outpaced estimates in three of the trailing four quarters and missed once. The same is depicted in the chart below:
The Western Union Company Price and EPS Surprise
The Western Union Company price-eps-surprise | The Western Union Company Quote
Bread Financial: Its first-quarter revenues are likely to reflect benefits from higher finance charges, owing to the increase in finance charge yield resulting from higher late fees. Increased investments undertaken in marketing, technology infrastructure and digital might have dampened BFH’s performance in the to-be-reported quarter.
The Zacks Consensus Estimate for the first-quarter earnings and revenues of Bread Financial is pegged at $4.43 per share and $907.3 million, respectively. This indicates year-over-year decline of 29.5% and 16.4%, respectively.
BFH has an Earnings ESP of -0.57% and a Zacks Rank 3.
Bread Financial surpassed estimates in each of the trailing four quarters. 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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