by Ian Harvey
October 22, 2019
Credit card operator Visa Inc (NYSE: V) is expected to release its third-quarter numbers after the market close Thursday, October 24. According to estimates, the consensus for Visa is EPS of $1.43 on $6.08 billion in revenue. The street expects another positive earnings surprise with a whisper number of $1.47 for the quarter. During the same period last year Visa earned $1.21 and reported sales of $5.4 billion.
According to history, the company tops EPS estimates 96% of the time, and sales estimates 89% of the time.
Shares of the credit card company have gained 35% this year, outperforming the S&P’s 20% gain, but recent weakness is leading some analysts to lower their estimates ahead of earnings.
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About Visa Inc…..
Visa was founded in the 1950s, but didn't come public until 2008. Since hitting a low in January 2009, Visa stock has risen roughly 1,700%.
Visa Inc operates as a payments technology company worldwide. The company facilitates commerce through the transfer of value and information among consumers, merchants, financial institutions, businesses, strategic partners, and government entities.
It operates VisaNet, a processing network that enables authorization, clearing, and settlement of payment transactions; and offers fraud protection for account holders and assured payment for merchants.
Visa Inc last announced its earnings results on Tuesday, July 23rd.
The credit-card processor reported $1.37 EPS for the quarter, topping the consensus estimate of $1.33 by $0.04. The firm had revenue of $5.84 billion during the quarter, compared to analysts’ expectations of $5.70 billion. Visa had a return on equity of 41.04% and a net margin of 53.43%.
The company’s quarterly revenue was up 11.5% on a
year-over-year basis. During the same quarter in the previous year, the
business earned $1.20 EPS.
Credit card companies have been strong in recent years as a strong overall economy and low unemployment has kept consumer confidence and spending high. Consumers are not only spending, but they are doing a lot of spending on their credit cards and are running record high balances.
Visa Inc has shown impressive earnings growth of 21.5% annually the last five years and looking ahead analysts expect the company to continue to grow profits at 15.5% per annum over the next five.
Revenues at Visa have risen consistently over the years, at a 10-year CAGR of 12.5%. Revenue growth continued in the first nine months of fiscal 2019, with the same being up 11% year over year. The company is likely to have retained its revenue momentum in the fourth quarter on the back of its strong market position and attractive core business that are steadily driven by new deals, renewed agreements, accretive acquisitions, increasing spending via cards, shift to digital form of payments and expansion of service offerings.
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Analysts Take on Visa Inc…..
Last Thursday Bernstein raised its expectations for the company’s results. Analyst Harshita Rawat lifted her EPS estimate to $1.45, citing credit card “purchase volume growth” as a catalyst.
Bank of America said not to expect “fireworks,” and cut its EPS estimate for the quarter to $1.42. The firm also lowered its revenue expectations to $6.05 billion, down from $6.08 billion previously.
The firm maintained its buy rating on the stock and said that it still views “fundamental sentiment as positive.”
Three research analysts have rated the stock with a hold rating and twenty-two have assigned a buy rating to the stock. Visa currently has an average rating of “Buy” and a consensus target price of $196.57.
Where to now?
Payments volume is a key indicator of performance. For the prior quarter, Visa Inc. reported more than $2.2 trillion in total payments volume.
The company's "network of networks" strategy, which emphasizes acquisitions and expansion outside of Visa's core network in an effort to provide wider coverage across financial institutions and borders, has paid off in earlier quarters this year. Continued high performance here and in the business-to-business space could continue to drive Visa's performance into the most recent quarter. The cross border business space is a $100 trillion market.
Looking ahead to Visa's fiscal Q4, if payments volume has remained steady or improved, then revenue, EPS and other performance metrics are more likely meet or exceed analyst expectations as well.
As a stalwart of the financial services industry, Visa tends to outperform analyst EPS expectations more than 9 times out of 10.
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