The financial services sector is poised for substantial growth in the foreseeable future, thanks to its demonstrated ability to navigate uncertainty, embrace digital omnichannel strategies, and incorporate cutting-edge technologies.
To capitalize on this promising industry outlook, it could be wise to add fundamentally sound financial stocks American Express Company (AXP), Visa Inc. (V), and Mastercard Incorporated (MA) to your portfolio for potential gains. Let’s understand this in detail.
In the past two years, the financial services industry adeptly confronted unparalleled uncertainty. Globally, organizations in real estate, insurance, investment management, banking, and capital markets exhibited remarkable resilience and adaptability during the pandemic, aiding individuals, businesses, and governments in their recovery efforts.
For instance, financial services companies have shifted their focus in recent years towards digital omnichannel strategies. Now, they are exploring emerging technologies such as meta-space and Web 3.0, poised to revolutionize the customer experience.
Digitalization, with a strong focus on cloud technologies, is becoming one of the prominent trends in the financial services industry. It promises contactless, highly efficient customer service and necessitates reallocating funds. This transformation would enhance industry competitiveness, adaptability, and customer-centricity.
Artificial Intelligence (AI) tools are also reshaping the sector by optimizing risk management, fraud detection, compliance, and customer service functions. Going forward, the global consumer finance market is expected to achieve a CAGR of 7.1%, reaching $1.96 trillion by 2029, according to a report from Blue Weave Consulting.
Considering these conducive trends, let's take a look at the fundamentals of the three best Consumer Financial Services stocks, starting with number 3.
Stock #3: American Express Company (AXP)
AXP offers an array of charge and credit payment card products alongside an extensive suite of travel-related services. It conducts its operations across three segments, Global Consumer Services Group; Global Commercial Services; and Global Merchant and Network Services.
In its fiscal second quarter report, AXP reported its fifth consecutive quarter of record-breaking revenues and record-high earnings per share, both showing a robust 12% year-over-year growth, underscoring the enduring vitality of its distinctive business model.
Stephen J. Squeri, Chairman and CEO, said, “Based on our results to date, we are reaffirming the full-year 2023 guidance we provided in January for revenue growth of 15 percent to 17 percent and EPS of $11.00 to $11.40."
For the second quarter that ended June 30, 2023, AXP’s total non-interest revenues increased 8.3% year-over-year to $11.95 billion. Its total interest income grew 70.6% from the year-ago value to $4.78 billion. Also, the company’s comprehensive income rose 22.4% from the prior year’s period to $2.20 billion.
In addition, as of June 30, 2023, the company’s cash and cash equivalents came in at $42.96 billion, compared to $33.91 billion as of December 31, 2022.
The consensus revenue estimate of $60.75 billion for the fiscal year ending December 2023 reflects a 14.9% year-over-year rise. Likewise, the consensus EPS estimate of $11.13 for the ongoing year indicates a 13% year-over-year improvement. AXP’s shares have gained 8.8% year-to-date to close the last trading session at $160.00.
AXP’s fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
AXP has a C grade for Value, Quality, and Stability. It is ranked #13 out of 50 stocks in the Consumer Financial Services industry.
In addition to the POWR Ratings I’ve just highlighted, you can see AXP’s ratings for Growth, Sentiment, and Momentum here.
Stock #2: Visa Inc. (V)
V is a global payments technology juggernaut. It orchestrates VisaNet, a cutting-edge transaction processing network facilitating payment transaction authorization, clearing, and settlement. Additionally, it offers Cybersource, an advanced payment management platform.
On September 5, V unveiled its latest stride in modernizing global money transfers by expanding its stablecoin settlement capabilities onto the high-performing Solana blockchain. Collaborating with merchant acquirers Worldpay and Nuvei, V aims to bolster its financial infrastructure.
V’s live pilots involving issuers and acquirers have already facilitated the transfer of millions in USDC across Solana and Ethereum blockchains to settle VisaNet-approved fiat transactions. This innovation guarantees Visa cardholders swift payment authorizations at global merchant locations, bolstering V’s customer experience.
On August 10, V and Conferma Pay, a leading virtual payments technology provider, announced an extension of their strategic partnership. They aim to augment Visa Commercial Pay, a suite of B2B payment solutions, streamlining cash flow for businesses and eradicating outdated manual procedures.
This collaboration could strengthen V's market presence in the burgeoning B2B payment sector, potentially increasing its revenue streams as it offers more efficient solutions to businesses, fostering greater usage of V’s services and further solidifying its financial standing in the industry.
During the third quarter that ended June 30, 2023, V’s net revenues increased 11.7% year-over-year to $8.12 billion. Its operating income rose 21.1% from the year-ago value to $5.02 billion. Also, the company’s non-GAAP net income and EPS grew 7% and 9.1% year-over-year to $4.50 billion and $2.16, respectively.
For the fiscal year ending September 2023, analysts expect V’s revenue to come in at $32.60 billion, indicating an 11.2% year-over-year improvement. Likewise, the company’s EPS for the current year is expected to grow 15.6% from the prior year to $8.67. Moreover, the company topped the consensus revenue and EPS estimates in all four trailing quarters.
The stock has gained 23.5% over the past year, closing the last trading session at $245.34.
V’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
V has an A grade for Quality and a B for Stability and Sentiment. It is ranked #5 in the 50-stock Consumer Financial Services industry.
Click here to access the additional V ratings (Growth, Momentum, and Value).
Stock #1: Mastercard Incorporated (MA)
MA facilitates payment transaction processing, spanning authorization, clearing, settlement, and supplementary payment services. It caters to account holders, merchants, financial institutions, businesses, governments, and organizations globally through integrated products and value-added offerings.
On July 24, MA unveiled Mastercard Receivables Manager, an automated solution designed to simplify the acceptance and processing of virtual card payments for businesses. This enhancement complements MA's virtual card platform, offering diverse payment options and advancing the digitization of B2B transactions for buyers and suppliers.
On May 26, MA and UniCredit announced a global expansion of their payment partnership. The strategic collaboration leverages UniCredit's extensive network of 13 banks to enhance the reach of MA's card payment expertise, ultimately driving increased transaction volumes and revenue for MA.
For the second quarter that ended June 30, 2023, MA’s adjusted net revenue increased 14.2% year-over-year to $6.27 billion. The company’s net income and EPS grew 9.8% and 12.9% year-over-year to $2.74 billion and $2.89, respectively.
As of June 30, 2023, the company’s total assets amounted to $39 billion, compared to $38.72 billion as of December 31, 2022.
The company’s revenue for the fiscal year ending December 2023 is expected to increase 13.4% year-over-year to $25.22 billion. Similarly, analysts expect MA’s EPS for the current year to come in at $12.15, up 14.1% from the previous year. Also, the company surpassed the consensus revenue and EPS estimates in all four trailing quarters.
Over the past year, the stock has gained 27%, closing the last trading session at $411.50.
MA’s robust outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
MA has a B grade for Stability, Quality, and Sentiment. It is ranked #4 out of 50 stocks within the same industry.
Click here to access additional MA ratings for Growth, Value, and Momentum.
What To Do Next?
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V shares were trading at $245.30 per share on Wednesday afternoon, down $0.04 (-0.02%). Year-to-date, V has gained 18.75%, versus a 17.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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