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Earnings Preview: Payments Companies Confront 3Q Challenges

Payments Dive

Plagued by economic challenges such as inflation, rising interest rates and a strong dollar, payments executives soon reporting quarterly earnings results are likely preparing for a darker economic outlook.

Although consumer spending has been fairly resilient, the Federal Reserve has repeatedly raised interest rates this year in an attempt to tamp down inflation. Companies in the payments space are focused on “what happens if and when the Fed breaks the back of the consumer to help stop inflation,” said Wolfe Research analyst Darrin Peller. That’s leading companies to gird themselves for an economic slowdown. 

As they report quarterly results over the coming weeks, payments companies are likely to say, “‘Numbers are going to have to come down a little bit, because we’re preparing for worse, both on interest expense, FX and maybe cost management,’” Peller said.

Here’s what major card companies Visa and Mastercard, payment processors like Fiserv and Fidelity National Information Services (FIS), PayPal and others in the payments arena are expected to confront this earnings season.

Visa, Mastercard

Consumer spending was generally healthy during the quarter, and the card networks also get a boost from things like the return of cross-border travel. Inflation tends to benefit the card companies because it pumps up their volume, Peller noted. 

Still, currency volatility pressures are likely to affect quarterly results, Bank of America equity research analyst Jason Kupferberg wrote in a Tuesday note to investors. San Francisco-based Visa reports fiscal fourth quarter results on Oct. 25, and Purchase, New York-based Mastercard reports 3Q results Oct. 27.