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Can Visa (V) Deliver Q2 Earnings Beat on Rising Payments Volume?
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Visa Inc. (V - Free Report) is set to continue its earnings beat streak for fiscal second-quarter 2022, whose results are set to be released on Apr 26, after the closing bell.
In the last reported quarter, the payments technology company’s adjusted earnings per share of $1.81 beat the Zacks Consensus Estimate by 7.1%, primarily due to solid growth in payments volume, processed transactions and cross-border volume. Increasing consumer spending, with growth in e-commerce and travel, aided the results.
The Zacks Consensus Estimate for fiscal second-quarter 2022 earnings per share of $1.65 has witnessed no upward revision but two downward movements by firms in the past week. Nevertheless, this estimate is indicative of a 19.6% increase from the year-ago reported figure. Similarly, the Zacks Consensus Estimate for revenues is pegged at $6.9 billion, suggesting a jump of 19.7% from the year-ago reported figure.
Visa beat earnings estimates in each of the trailing four quarters, with an average of 8.6%. This is depicted in the graph below.
Our proven model predicts an earnings beat for Visa this time around as well. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.
Earnings ESP: Earnings ESP for the company is currently +0.74%. This is because the Most Accurate Estimate is pegged at $1.66 per share, higher than the Zacks Consensus Estimate of $1.65. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Visa currently holds a Zacks Rank #3.
Factors Driving Better-Than-Expected Earnings
Consumers and merchants adapted to digital payments in the face of the pandemic, given the ease, convenience and security offered by the same. These trends are expected to have continued in fiscal second-quarter 2022. Consumer spending is expected to have witnessed a massive improvement in the March quarter amid the easing of restrictions owing to vaccination rollout, pent-up demand, higher personal savings and bullish consumer sentiment.
Hence, the Zacks Consensus Estimate for total volume — which consists of cash volume and payments volume (the primary lever of service revenues) — is pegged at $3,418 billion, indicating an increase from $3,043 billion in the year-ago period.
The Zacks Consensus Estimate for network and processing expenses indicates a 17.9% year-over-year increase. This might have partially offset the positive impact of higher volume. Nevertheless, the rising payment transactions are likely to have boosted the bottom line.
As the company draws revenues as a set percentage of total transaction value every time a customer’s debit/credit card is used for making payments, higher spending on its cards means more revenues in the form of transaction processing fees. The Zacks Consensus Estimate for total payments transactions indicates an 18.1% growth year over year.
Also, the consensus mark signals a 13.5% year-over-year increase in data processing revenues. With the growth in payments volume and processed transactions, Visa’s operating efficiency is expected to have improved in fiscal second-quarter 2022. This is expected to have positioned the company for not only year-over-year growth but also an earnings beat.
Other Stocks That Warrant a Look
Here are some other companies from the Business Services space that you may also want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this time around:
Black Knight, Inc. has an Earnings ESP of +3.12% and a Zacks Rank of 3.
Black Knight’s bottom line for the to-be-reported quarter is expected to rise 7.1% year over year.
WEX Inc. (WEX - Free Report) has an Earnings ESP of +1.57% and is a Zacks #3 Ranked player.
WEX’s earnings per share for the to-be-reported quarter are expected to jump 52% year over year.
Image: Bigstock
Can Visa (V) Deliver Q2 Earnings Beat on Rising Payments Volume?
Visa Inc. (V - Free Report) is set to continue its earnings beat streak for fiscal second-quarter 2022, whose results are set to be released on Apr 26, after the closing bell.
In the last reported quarter, the payments technology company’s adjusted earnings per share of $1.81 beat the Zacks Consensus Estimate by 7.1%, primarily due to solid growth in payments volume, processed transactions and cross-border volume. Increasing consumer spending, with growth in e-commerce and travel, aided the results.
Let’s see how things have shaped up prior to the fiscal second-quarter 2022 earnings announcement.
Trend in Estimate Revision
The Zacks Consensus Estimate for fiscal second-quarter 2022 earnings per share of $1.65 has witnessed no upward revision but two downward movements by firms in the past week. Nevertheless, this estimate is indicative of a 19.6% increase from the year-ago reported figure. Similarly, the Zacks Consensus Estimate for revenues is pegged at $6.9 billion, suggesting a jump of 19.7% from the year-ago reported figure.
Visa beat earnings estimates in each of the trailing four quarters, with an average of 8.6%. This is depicted in the graph below.
Visa Inc. Price and EPS Surprise
Visa Inc. price-eps-surprise | Visa Inc. Quote
What the Quantitative Model Suggests
Our proven model predicts an earnings beat for Visa this time around as well. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.
Earnings ESP: Earnings ESP for the company is currently +0.74%. This is because the Most Accurate Estimate is pegged at $1.66 per share, higher than the Zacks Consensus Estimate of $1.65. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Visa currently holds a Zacks Rank #3.
Factors Driving Better-Than-Expected Earnings
Consumers and merchants adapted to digital payments in the face of the pandemic, given the ease, convenience and security offered by the same. These trends are expected to have continued in fiscal second-quarter 2022. Consumer spending is expected to have witnessed a massive improvement in the March quarter amid the easing of restrictions owing to vaccination rollout, pent-up demand, higher personal savings and bullish consumer sentiment.
Hence, the Zacks Consensus Estimate for total volume — which consists of cash volume and payments volume (the primary lever of service revenues) — is pegged at $3,418 billion, indicating an increase from $3,043 billion in the year-ago period.
The Zacks Consensus Estimate for network and processing expenses indicates a 17.9% year-over-year increase. This might have partially offset the positive impact of higher volume. Nevertheless, the rising payment transactions are likely to have boosted the bottom line.
As the company draws revenues as a set percentage of total transaction value every time a customer’s debit/credit card is used for making payments, higher spending on its cards means more revenues in the form of transaction processing fees. The Zacks Consensus Estimate for total payments transactions indicates an 18.1% growth year over year.
Also, the consensus mark signals a 13.5% year-over-year increase in data processing revenues. With the growth in payments volume and processed transactions, Visa’s operating efficiency is expected to have improved in fiscal second-quarter 2022. This is expected to have positioned the company for not only year-over-year growth but also an earnings beat.
Other Stocks That Warrant a Look
Here are some other companies from the Business Services space that you may also want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this time around:
Black Knight, Inc. has an Earnings ESP of +3.12% and a Zacks Rank of 3.
Black Knight’s bottom line for the to-be-reported quarter is expected to rise 7.1% year over year.
WEX Inc. (WEX - Free Report) has an Earnings ESP of +1.57% and is a Zacks #3 Ranked player.
WEX’s earnings per share for the to-be-reported quarter are expected to jump 52% year over year.
First Advantage Corporation (FA - Free Report) has an Earnings ESP of +5.63% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
First Advantage’s bottom-line estimate for the to-be-reported quarter has improved 11.8% in the past 30 days.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.