KBW Offers Comment on Mastercard’s Coronavirus Projections and Mobile Payments

March 22, 2020         By: Steven Anderson

The ongoing issues surrounding the COVID-19 coronavirus are delivering blows to just about every sector of the economy, with the exception of a few unexpected exceptions like healthcare operations and telecommuting service providers. Not surprisingly, Mastercard is taking hits in an environment where both supply and demand for a variety of items is on the decline, and recently detailed some of these issues in a conference. The folks at Keefe, Bruyette & Woods (KBW) took a look at the conference’s outcome and found some noteworthy points therein.

After releasing revised guidance back around the end of February, things didn’t much improve for Mastercard. The extent of that lack of improvement, or any backtracking instead, however, wasn’t quantified. Thus, Mastercard’s strategy seems to be one of “circle the wagons and let this whole business die down.” It’s focusing on keeping its expenses low, which is a rational viewpoint, especially for a company that’s expecting to recover status quo in the fairly near term.

Given that, back when Mastercard released its altered guidance, the COVID-19 coronavirus had been largely kept within the Asia-Pacific region—cross-border operations really hadn’t been all that affected by the disease—and that impacted overall projections. Now, with the disease so clearly spreading—though actually hitting people at varying levels—it’s clear things have changed.

Now, Mastercard expects that it will see a two percentage point impact to net revenue growth for the first quarter, and that’s up from one percent previously. That’s about an extra $0.02 per share, so it’s not good news, but not “close-the-company” tier bad news, either.

Mastercard is, as noted previously, looking to cut expenses, which given the coronavirus is actually easier than may be thought at first glance. It’s cutting back on travel expenses, for example, and that’s giving the company a little extra cushion to work with. It’s also expecting some reductions in fuel costs, which will hurt it somewhat given how people frequently pay for fuel at the pump, but apart from that, Mastercard expects that its exposure on this front will be comparatively quiet.

The only real silver lining to be had in this array of news is that it’s not much, much worse. The way things have been going lately, hearing about a three percent or higher hit to earnings wouldn’t have been out of line. The notion that this is an item that’s going to retract fairly quickly isn’t so far out of line either; over in China, reports have emerged that the Apple Store locations are all open again, which is something, if true.

Only time will tell how all this boils down, but it’s still clearly a disaster no matter how you slice it. Considering it’s already left some people dead that much is obvious. At this point all we can really hope is that it’s a disaster that doesn’t linger, and that the mobile payments sector—among all the others out there—can weather the storm.