MasterCard Cautions Negative Q1 Revenue Impact from Coronavirus

May 6, 2020

Mastercard Cautions Negative Q1 Revenue Impact from Coronavirus

Earnings releases were tinged with a coronavirus theme during companies’ conference calls as decision-makers fear the negative effect of the coronavirus on travel and e-commerce globally. While many companies say it’s too early to assess the coronavirus impact, some companies offer an analysis of sales loss and an earnings hit. 

Mastercard Prediction 

Mastercard Inc (MA) warned investors that the effects of the coronavirus outbreak could negatively impact first-quarter revenue, as well as overall 2020 revenue on Monday, February 24. After the announcement, MA closed down $15.03, 4.42 percent, and dropped further $4.68, 1.44 percent, during after-hours trade. 

Expecting the year-over-year net revenue growth to be roughly 2-3 percentage points lower than their previous estimate if the coronavirus outbreak continues until the end of the quarter, the company now projects revenue growth to be 9-10 percent in the first-quarter based on a currency-neutral basis. The news follows Mastercard’s better than expected fourth-quarter results, which showed consumers using credit card processing for holiday shopping. 

First-Quarter Earnings Expectations

General Electric’s description of the coronavirus as an “evolving variable” is an apt summary of companies’ approaches to describing the potential negative effect the virus will have on first-quarter earnings. With many companies adjusting earnings and managing expectations of investors and with companies interconnected with China and even partially housed in China, coronavirus is playing a central role in anticipated disruption, as well as the current disruption in the world economy.

Global Impacts

First identified in Wuhan, China at the end of 2019, COVID-19, also known as the coronavirus, is spreading across the globe, infecting more than 100,000 and killing more than 3,000 people. Efforts to contain the virus and the resulting effect on human behavior have disrupted supply chains. 

Both manufacturing and supply industries in China, as well as in other countries in the region, are already slowing and even stopping business despite Chinese banks loaning money to companies and communities afflicted by the virus and despite the Chinese government working with tech companies on systems to determine the health of workers. The resulting stock market sell-off on Monday, February 24 was the worst in two years with fears of a worldwide economic slowdown due to coronavirus

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