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Visa (V) Tops Q1 Earnings & Revenues, Reiterates FY17 View
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Riding on higher revenues, Visa Inc. (V - Free Report) posted first-quarter fiscal 2017 (ended Dec 31, 2016) earnings per share of 86 cents per share, handily beating the Zacks Consensus Estimate of 78 cents. Also, the bottom line improved 7% year over year.
Results were driven by the acquisition of Visa Europe and solid growth in payments volume as well as processed transactions. Notably, USAA and Costco volumes continued to drive the U.S. credit growth. However, on the down side, the quarter witnessed higher expenses.
Net income of $2.1 billion in the quarter climbed 7% from the prior-year quarter.
Excluding non-recurring items, net income for first-quarter fiscal 2017 jumped 23% from the prior year’s adjusted results.
Alfred F. Kelly, Jr., Chief Executive Officer of Visa stated, “As we look ahead, we continue to see good momentum in the business driven by domestic and cross-border volumes, increasing consumer participation in electronic payments in developing markets, and the further acceleration of e-commerce in developed markets.” Kelly added, “We remain focused on the integration of Europe which is proceeding well.”
Visa Europe Acquisition Drives Revenues
Net operating revenue of $4.5 billion surpassed the Zacks Consensus Estimate of $4.3 billion. Also, revenues climbed 25% year over year. This upside was primarily driven by the acquisition of Visa Europe and consistent growth in payments volume and processed transactions.
On a constant dollar basis, payments volume growth for the reported quarter surged 39% year over year to $1.8 trillion. Cross-border volume growth was 140% for the quarter ended Dec 31, 2016. Cross-border volume growth, on a constant dollar basis when normalized for Europe, was 12% year over year.
Total processed transactions for the reported quarter were 27.3 billion, reflecting a 44% rise over the prior year. When normalized for Europe, total processed transactions growth was 13% over the prior year.
Service revenues increased 17% year over year to $1.9 billion on payments volume in the prior quarter. Notably, other revenue components are based on reported quarter activity. Data processing revenues were up 28% on a year-over-year basis to $1.9 billion, while international transaction revenues surged 44% to $1.5 billion. Other revenues advanced 2% year over year to $203 million.
Client incentives of $1 billion represented 18.9% of gross revenues in the reported quarter.
Operating expenses increased 16% year over year to $1.4 billion mainly reflecting the inclusion of Visa Europe and higher personnel, marketing, and general and administrative expenses.
Financial Update
Cash, cash equivalents, and available-for-sale investment securities were $13.2 billion as of Dec 31, 2016. Total assets of $64 billion remained largely stable with prior quarter. Total equity was $32 billion compared with $33 billion as of Dec 31, 2015.
Share Repurchase Update
Visa repurchased 22.3 million shares of class A common stock at an average price of $79.77 per share, during the reported quarter.
Fiscal 2017 Guidance
This outlook includes integration expenses associated with the Visa Europe buyout of about $80 million.
For fiscal 2017, Visa largely reaffirmed its guidance. Annual operating margin is anticipated at mid-60%, while client incentives are expected to account for 20.5%–21.5% of gross revenue. Additionally, effective tax rate is reiterated at low 30s.
Visa projects annual net revenue growth in a range of 16–18% with an adverse foreign currency impact of 2–2.5%. Adjusted earnings per share is expected to grow at mid-teens digit on normal dollar basis, including 2.5%–3% of negative foreign currency impact.
Our Take
Visa’s results reflect a robust performance. The company remains well positioned for growth on the back of its solid market position and significant opportunities from the secular shift toward electronic payments. However, high client incentives and litigation issues remain concerns.
MasterCard Incorporated (MA - Free Report) reported earnings of 86 cents per share, surpassing the Zacks Consensus Estimate by a penny. Earnings were up 8.9% year over year. However, quarterly results reflected lower-than-expected revenues.
American Express Company (AXP - Free Report) reported fourth-quarter 2016 adjusted earnings per share of 91 cents, missing the Zacks Consensus Estimate of 98 cents per share. Results were affected by higher provisions and substantial increase in marketing and promotion expenses.
Discover Financial Services’ (DFS - Free Report) fourth-quarter 2016 earnings of $1.40 per share beat the Zacks Consensus Estimate of $1.38. The bottom line also improved 23% year over year. Results were driven by higher revenues and lower expense.
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Visa (V) Tops Q1 Earnings & Revenues, Reiterates FY17 View
Riding on higher revenues, Visa Inc. (V - Free Report) posted first-quarter fiscal 2017 (ended Dec 31, 2016) earnings per share of 86 cents per share, handily beating the Zacks Consensus Estimate of 78 cents. Also, the bottom line improved 7% year over year.
Results were driven by the acquisition of Visa Europe and solid growth in payments volume as well as processed transactions. Notably, USAA and Costco volumes continued to drive the U.S. credit growth. However, on the down side, the quarter witnessed higher expenses.
Net income of $2.1 billion in the quarter climbed 7% from the prior-year quarter.
Excluding non-recurring items, net income for first-quarter fiscal 2017 jumped 23% from the prior year’s adjusted results.
Alfred F. Kelly, Jr., Chief Executive Officer of Visa stated, “As we look ahead, we continue to see good momentum in the business driven by domestic and cross-border volumes, increasing consumer participation in electronic payments in developing markets, and the further acceleration of e-commerce in developed markets.” Kelly added, “We remain focused on the integration of Europe which is proceeding well.”
Visa Europe Acquisition Drives Revenues
Net operating revenue of $4.5 billion surpassed the Zacks Consensus Estimate of $4.3 billion. Also, revenues climbed 25% year over year. This upside was primarily driven by the acquisition of Visa Europe and consistent growth in payments volume and processed transactions.
On a constant dollar basis, payments volume growth for the reported quarter surged 39% year over year to $1.8 trillion. Cross-border volume growth was 140% for the quarter ended Dec 31, 2016. Cross-border volume growth, on a constant dollar basis when normalized for Europe, was 12% year over year.
Total processed transactions for the reported quarter were 27.3 billion, reflecting a 44% rise over the prior year. When normalized for Europe, total processed transactions growth was 13% over the prior year.
Service revenues increased 17% year over year to $1.9 billion on payments volume in the prior quarter. Notably, other revenue components are based on reported quarter activity. Data processing revenues were up 28% on a year-over-year basis to $1.9 billion, while international transaction revenues surged 44% to $1.5 billion. Other revenues advanced 2% year over year to $203 million.
Client incentives of $1 billion represented 18.9% of gross revenues in the reported quarter.
Operating expenses increased 16% year over year to $1.4 billion mainly reflecting the inclusion of Visa Europe and higher personnel, marketing, and general and administrative expenses.
Financial Update
Cash, cash equivalents, and available-for-sale investment securities were $13.2 billion as of Dec 31, 2016. Total assets of $64 billion remained largely stable with prior quarter. Total equity was $32 billion compared with $33 billion as of Dec 31, 2015.
Share Repurchase Update
Visa repurchased 22.3 million shares of class A common stock at an average price of $79.77 per share, during the reported quarter.
Fiscal 2017 Guidance
This outlook includes integration expenses associated with the Visa Europe buyout of about $80 million.
For fiscal 2017, Visa largely reaffirmed its guidance. Annual operating margin is anticipated at mid-60%, while client incentives are expected to account for 20.5%–21.5% of gross revenue. Additionally, effective tax rate is reiterated at low 30s.
Visa projects annual net revenue growth in a range of 16–18% with an adverse foreign currency impact of 2–2.5%. Adjusted earnings per share is expected to grow at mid-teens digit on normal dollar basis, including 2.5%–3% of negative foreign currency impact.
Our Take
Visa’s results reflect a robust performance. The company remains well positioned for growth on the back of its solid market position and significant opportunities from the secular shift toward electronic payments. However, high client incentives and litigation issues remain concerns.
Visa Inc. Price, Consensus and EPS Surprise
Visa Inc. Price, Consensus and EPS Surprise | Visa Inc. Quote
Visa currently carries Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Performance of Other Companies
MasterCard Incorporated (MA - Free Report) reported earnings of 86 cents per share, surpassing the Zacks Consensus Estimate by a penny. Earnings were up 8.9% year over year. However, quarterly results reflected lower-than-expected revenues.
American Express Company (AXP - Free Report) reported fourth-quarter 2016 adjusted earnings per share of 91 cents, missing the Zacks Consensus Estimate of 98 cents per share. Results were affected by higher provisions and substantial increase in marketing and promotion expenses.
Discover Financial Services’ (DFS - Free Report) fourth-quarter 2016 earnings of $1.40 per share beat the Zacks Consensus Estimate of $1.38. The bottom line also improved 23% year over year. Results were driven by higher revenues and lower expense.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>