It has been about a month since the last earnings report for Visa (V Quick QuoteV - Free Report) . Shares have added about 7.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Visa due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Visa Q1 Earnings Surpass Estimates, Revenues Down Y/Y

Visa’s fiscal first-quarter 2021 earnings of $1.42 per share, beat the Zacks Consensus Estimate by 11.8%. However, the bottom line declined 3% year over year.

Meanwhile, the company’s net operating revenues of $5.7 billion outpaced the Zacks Consensus Estimate by 3.2%. However, the top line fell 6% year over year.

Results benefited from improved payments volume and processed transactions, partly offset by decline in cross-border volumes

Financial Performance

On a constant-dollar basis, payments volume in the quarter was up 5% year over year. Also, processed transactions improved 4% from the prior-year quarter to 39.2 billion driven by domestic transactions.

Total cross border volume of Visa on a constant-dollar basis fell 21% year over year during the quarter. The company’s cross-border volumes excluding transactions within Europe (which drive its international transaction revenues) slumped 33% year over year on a constant-dollar basis.

Service revenues were up 5% year over year to $2.7 billion attributable to higher payments volume of the fourth quarter. On a year-over-year basis, data processing revenues were up 6% year over year to $3 billion while international transaction revenues plunged 28% from the prior-year quarter to $1.5 billion. Other revenues climbed 5% year over year to $384 million.

Client incentives of $1.9 billion grew 6% year over year.
Operating expenses declined 10% year over year to $1.8 billion attributable to lower general and administrative, marketing, and network and processing expenses coupled with reduced professional fees.
Interest expense escalated 22.5% year over year to $136 million.

Balance Sheet (as of Dec 31, 2020)

Cash and cash equivalents were $15 billion, down 7.7% from fiscal year end Sep 30, 2020.

Total assets were $80.4 billion, which declined 0.6% from fiscal year end Sep 30, 2020.

Long-term debt slid nearly 0.1% from fiscal year end Sep 30, 2020 to $21.1 billion.

Share Buyback and Dividend Update

During the quarter under review, the company made share repurchases worth $1.8 billion.

On Jan 26, 2021, the company declared a quarterly cash dividend of 32 cents per share. The dividend will be paid on Mar 1, 2021 to its shareholders of record as of Feb 12.

Business Update

In November 2020, the company unveiled that it has completed the buyout of YellowPepper. This acquisition is in line with Visa’s endeavor to bolster its “network of networks” strategy to become a single point of access for initiating multiple transaction types and enabling a secure flow of funds.
On maturity of its senior notes, the payment processor repaid $3 billion of principal in December 2020.

This month, Visa and fintech startup Plaid have called off their previously announced $5.3-billion merger after facing a legal challenge from the Department of Justice (DoJ). The said deal was announced on Jan 13, 2020

 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

Currently, Visa has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Visa has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.