Can MasterCard Earnings Keep Charging Forward?

Source: Flickr user Hakan Dahlstrom.

Credit card giant MasterCard (MA 3.32%) may not be the biggest player in the industry, but it has done an impressive job of growing its reach, especially with its emphasis on making the most of its international opportunities. Economic conditions around the world have been volatile, with some regions experiencing significant disruptions, but so far, MasterCard has done a good job of weathering overseas storms and pressing forward on its long-term strategic plan. As investors prepare for Wednesday's second-quarter financial results from the company, MasterCard has most of those following the stock optimistic about its future prospects, even though some worry that the pace of its earnings growth could start to slow. Let's take a closer look at what MasterCard is likely to tell us in its report and whether it can keep growing at the speed that investors want to see.

Stats on MasterCard

Source: Yahoo! Finance.

Can MasterCard earnings keep growing?
As we've seen in past quarters, investors have been a bit nervous in recent months about MasterCard earnings, reducing their second-quarter projections by $0.02 per share and making slightly larger cuts to third-quarter 2015 and full-year 2016 earnings estimates. The stock has kept making progress, though, with gains of 5% since late April.

MasterCard's first-quarter earnings report gave investors a good view on what's happening with the card giant. The strong dollar continued to hold MasterCard's results back, limiting revenue growth to 3% due to a currency hit of five percentage points. Yet cross-border transaction volumes climbed 19%, and even with the dollar's impact, MasterCard enjoyed its best performance from its international divisions. An emphasis on containing costs also helped ensure that earnings growth would outpace slower top-line gains.

One of the biggest opportunities for MasterCard internationally is in China, and the company's prospects there appear to be improving. During the quarter, Chinese officials said that foreign payment processors like MasterCard would be open to operate and serve the nation's business and consumer community, and according to figures from China's central bank, card-based transactions climbed to $6.8 trillion last year. That represents a huge pool of previously untapped processing business for MasterCard, and given the success it has had in beating out its main rivals for global business, MasterCard could well grab up a bigger piece of that pie than its position within the industry would suggest. In particular, its branding agreement with Chinese counterpart UnionPay could open the door to a competitive advantage in the newly open market.

MasterCard is also working at improving the customer experience in the key issue of security. Earlier this month, MasterCard opened its digital security facility to customers, with its DigiSec Lab looking to beat hackers to the punch by proactively testing threats to digital payment systems. Working with members of the academic community as well as various government security agencies, MasterCard believes that a collaborative effort will be the best way to keep criminals at bay and to improve payment security to the greatest extent possible.

In the MasterCard earnings report, watch closely to see how the company responds to the strategic opportunities available to it globally, especially in China. As the card giant starts to hit a point at which past growth rates will be tough to sustain, MasterCard will have to take maximum advantage of the major sources of potential new business wherever they arise. As the global payment system continues to evolve, MasterCard will continue to be an integral part of its progress, and shareholders want assurances that the company will stay on the cutting edge of the payments business well into the future.