Back to top

Analyst Blog

On Jan 8, 2014, shares of Visa Inc. (V - Analyst Report) reached a new 52-week high of $223.00. The rally was driven by business diversification strategies, expense-reduction initiatives and zero debt burden of the company.

With respect to earnings, this global payments processor witnessed positive earnings surprises in three of the last four quarters, with an average beat of 4.5%. In the fourth quarter of fiscal 2013 (ending Sep 30, 2013), Visa’s operating earnings of $1.85 per share successfully met the Zacks Consensus Estimate and also improved year over year. The company undertook a number of expense reduction initiatives that contributed positively to earnings.

Overall, Visa has performed well in fiscal 2013. Despite stiff competition and regulatory uncertainties, Visa was successful in controlling the increase in expenses. Moreover, growth in revenues surpassed the increase in expenses leading to margin expansion in fiscal 2013. The 1-year return from the stock is 41.8%, higher than the S&P 500 estimated return of 25.3%.   

The business expansion strategies like alliance with Blue Label Mexico, AnywhereCommerce, Miura Systems Limited and ICICI Bank Limited (IBN - Analyst Report) in the recent past was impressive. These alliances poised the company to strengthen its card business by increasing retail locations that accept Visa cards as well as by ensuring the ease and security of transactions.

Moreover, Visa is also working toward increasing customer satisfaction by enabling the use of mobile phones for making payments or transferring money. The initiatives taken by the company to reduce frauds in digital payment transaction are also noteworthy. In this regard, a special mention must be made of Visa’s association with Ethoca to reduce eCommerce frauds, with MasterCard Incorporated (MA - Analyst Report) and American Express (AXP - Analyst Report) to secure payments in digital channels and an upgrade in Visa’s Advanced Authorization (VAA) technology.

Visa has also been intent in returning more value to its shareholders. Thus, the company purchased 33 million shares for $5.4 billion over fiscal full-year 2013. Management also authorized a $5 billion share repurchase program and a 21% hike in its annual dividend in Oct 2013 that should boost investor confidence on the stock.

However, valuation looks stretched for Visa. This is because the shares are trading at a premium to the peer group average, both on a price-to-book basis (up 47.4%) and forward price-to-earnings basis (up 21.1%). Moreover, the return on equity is at a 19.2% discount to the peer group average. Nevertheless, the long-term growth rate for this stock is 17.5%.

Visa carries a Zacks Rank #2 (Buy). MasterCard and American Express also carry the same Zacks Rank as Visa.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
SUPER MICRO… SMCI 27.00 +10.25%
CANADIAN SO… CSIQ 38.34 +8.18%
BANCO DO BR… BDORY 16.78 +8.05%
CENTURY ALU… CENX 26.97 +7.97%
WILLDAN GRO… WLDN 11.38 +5.86%