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While they have not so far cut back on buying household
appliances or even big ticket purchases like cars, a vacation
has not been on the cards for many, according to a survey from
the Conference Board.
Record high gasoline prices and expensive airfare could slow
consumer spending on travel - a big source of revenue for
Mastercard, Visa and America Express.
For now, Wall Street analysts are not much worried about that.
"The general economic background for the consumer continues to
remain quite solid. Most of the forward indicators indicate a
healthy consumer balance sheet," said Mihir Bhatia, equity
research analyst at Bank of America Securities.
THE CONTEXT
The financial health of Americans held up well in the second
quarter even as gas and grocery bills swelled, eating into their
savings for the first time since the pandemic, U.S. bank
executives said.
While U.S. consumer confidence dropped to a 16-month low in June
on worries about high inflation and a possible recession, there
is still a long way to go before those fears materialize, data
show.
"Because of their diversification, their reach online and
in-store, Visa and Mastercard are very well-positioned despite
the macroeconomic situation", said Jordan McKee, principal
research analyst at 451 Research, the tech research group within
S&P Global Market Intelligence.
Investments in the cryptocurrency space, real-time payments and
other expansion initiatives over the years will also benefit the
two credit card giants, McKee said.
Despite tough comparisons with last year, when the Federal
Reserve and the U.S. government pumped in easy money, credit
quality remains strong, according to Credit Suisse analysts
Moshe Orenbuch and Hoang Nguyen.
"Based on the current delinquency profile, we don't see any
evidence suggesting a sharp increase in credit loss soon," the
analysts said.
AmEx will report its quarterly results on Friday, while Visa and
Mastercard are expected to report next week.
THE FUNDAMENTALS
Refinitiv revenue
Company estimate Refinitiv EPS
estimate
AmEx $12.5 bln (Up 22.1% y-o-y) $2.41
Visa $7.08 bln (Up 16.1% y-o-y) $1.74
Mastercard $5.23 bln (Up 16.2% y-o-y) $2.35
WALL STREET SENTIMENT
** American Express - 16 of 30 brokerages rate the stock "buy"
or higher, 13 "hold" and one "sell"; their median PT is $178.50,
down from last month's $202
** Visa Inc - 39 of 43 brokerages rate the stock "buy" or
higher, four "hold"; their median PT is $270
** Mastercard Inc - 38 of 42 brokerages rate the stock "buy" or
higher, three "hold" and one "sell"; their median PT is $430,
down from last month's $438
(Reporting by Niket Nishant and Manya Saini in Bengaluru;
Editing by Arun Koyyur)
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