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Visa (V) Up 1.5% Since Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Visa Inc. (V - Free Report) . The stock has added about 1.5% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Visa Beats on Q2 Earnings & Revenues on Volume Growth
Riding on higher revenues, Visa posted second-quarter fiscal 2017 (ended Dec 31, 2016) earnings of $0.86 per share, beating the Zacks Consensus Estimate of $0.79. Also, the bottom line improved 27% 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 U.S. credit growth. However, on the down side, the quarter witnessed higher expenses.
Net operating revenue of $4.5 billion surpassed the Zacks Consensus Estimate of $4.2 billion. Also, revenues climbed 23% year over year. This upside was primarily driven by the acquisition of Visa Europe and consistent growth in cross-border volume and processed transactions.
On a constant dollar basis, payments volume growth for the reported quarter surged 37% year over year to $1.7 trillion. Cross-border volume growth was 132% for the quarter ended Mar 31, 2017. Cross-border volume growth, on a constant dollar basis when normalized for Europe, was 11% year over year. This growth was partly offset by adverse foreign exchange movement.
Total processed transactions for the reported quarter were 26.3 billion, reflecting a 42% rise year over year. When normalized for Europe, total processed transactions growth was 12% over the prior year quarter.
Service revenues increased 17% year over year to $2.0 billion on payments volume in the prior quarter. Notably, other revenue components are based on the reported quarter’s activity. Data processing revenues were up 25% on a year-over-year basis to $1.8 billion, while international transaction revenues surged 41% to $1.5 billion. Other revenues advanced 3% year over year to $203 million.
Client incentives of $1 billion represented 18.7% of gross revenues in the reported quarter.
Adjusted operating expenses increased 24% year over year to $1.5 billion, mainly reflecting the inclusion of Visa Europe’s operating expense. Foreign exchange rate shift negatively impacted earnings per share growth by approximately 4%.
Financial Update
Cash, cash equivalents, and available-for-sale investment securities were $10.7 billion as of Mar 31, 2017, down from $13.2 billion as of Dec 31, 2016. Total assets were $63.2 billion as of Mar 31, 2017.
Share Repurchase Update
Visa repurchased shares worth $1.7 billion during the quarter. The board of directors authorized a new $5.0 billion class A common stock share repurchase program and the company currently has $7.2 billion of funds available for share repurchase. Fiscal 2017 Guidance
This outlook includes integration expenses associated with the Visa Europe buyout for 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, the effective tax rate projection has been reiterated at 30%.
Visa reaffirmed annual net revenue growth in a range of 16–18% with an adverse foreign currency impact of 2–2.5%. Also, adjusted earnings per share growth was reiterated at mid-teens digit on a normal dollar basis, including 2.5–3% of negative foreign currency impact.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a upward trend in fresh estimates. There has been one revision higher for the current quarter compared to none lower.
At this time, Visa's stock has a poor Growth Score of 'F'. However, its Momentum is doing a bit better with a 'D'. Charting a somewhat similar path, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
While estimates have been moving upward, the magnitude of the revision is net zero. Interestingly, the stock has a Zacks Rank #2 (Buy). We are looking for an above average return from the stock in the next few months.
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Visa (V) Up 1.5% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Visa Inc. (V - Free Report) . The stock has added about 1.5% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Visa Beats on Q2 Earnings & Revenues on Volume Growth
Riding on higher revenues, Visa posted second-quarter fiscal 2017 (ended Dec 31, 2016) earnings of $0.86 per share, beating the Zacks Consensus Estimate of $0.79. Also, the bottom line improved 27% 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 U.S. credit growth. However, on the down side, the quarter witnessed higher expenses.
Net operating revenue of $4.5 billion surpassed the Zacks Consensus Estimate of $4.2 billion. Also, revenues climbed 23% year over year. This upside was primarily driven by the acquisition of Visa Europe and consistent growth in cross-border volume and processed transactions.
On a constant dollar basis, payments volume growth for the reported quarter surged 37% year over year to $1.7 trillion. Cross-border volume growth was 132% for the quarter ended Mar 31, 2017. Cross-border volume growth, on a constant dollar basis when normalized for Europe, was 11% year over year. This growth was partly offset by adverse foreign exchange movement.
Total processed transactions for the reported quarter were 26.3 billion, reflecting a 42% rise year over year. When normalized for Europe, total processed transactions growth was 12% over the prior year quarter.
Service revenues increased 17% year over year to $2.0 billion on payments volume in the prior quarter. Notably, other revenue components are based on the reported quarter’s activity. Data processing revenues were up 25% on a year-over-year basis to $1.8 billion, while international transaction revenues surged 41% to $1.5 billion. Other revenues advanced 3% year over year to $203 million.
Client incentives of $1 billion represented 18.7% of gross revenues in the reported quarter.
Adjusted operating expenses increased 24% year over year to $1.5 billion, mainly reflecting the inclusion of Visa Europe’s operating expense.
Foreign exchange rate shift negatively impacted earnings per share growth by approximately 4%.
Financial Update
Cash, cash equivalents, and available-for-sale investment securities were $10.7 billion as of Mar 31, 2017, down from $13.2 billion as of Dec 31, 2016. Total assets were $63.2 billion as of Mar 31, 2017.
Share Repurchase Update
Visa repurchased shares worth $1.7 billion during the quarter. The board of directors authorized a new $5.0 billion class A common stock share repurchase program and the company currently has $7.2 billion of funds available for share repurchase.
Fiscal 2017 Guidance
This outlook includes integration expenses associated with the Visa Europe buyout for 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, the effective tax rate projection has been reiterated at 30%.
Visa reaffirmed annual net revenue growth in a range of 16–18% with an adverse foreign currency impact of 2–2.5%. Also, adjusted earnings per share growth was reiterated at mid-teens digit on a normal dollar basis, including 2.5–3% of negative foreign currency impact.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a upward trend in fresh estimates. There has been one revision higher for the current quarter compared to none lower.
Visa Inc. Price and Consensus
Visa Inc. Price and Consensus | Visa Inc. Quote
VGM Scores
At this time, Visa's stock has a poor Growth Score of 'F'. However, its Momentum is doing a bit better with a 'D'. Charting a somewhat similar path, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
While estimates have been moving upward, the magnitude of the revision is net zero. Interestingly, the stock has a Zacks Rank #2 (Buy). We are looking for an above average return from the stock in the next few months.