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Can Visa's (V) Q1 Earnings Beat Estimates on Higher Volumes?

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Visa Inc. (V - Free Report) is set to continue its earnings beat streak in the first quarter of fiscal 2023, the results of which are expected to be released on Jan 26, after the closing bell.

In the last reported quarter, the payments technology company’s adjusted earnings per share of $1.93 beat the Zacks Consensus Estimate by 3.8% primarily due to continued growth in payment volume, cross-border volume and processed transactions. Also, spending on travel and entertainment rose from the year-ago period. However, elevated operating costs partly offset the upside.

Now, let’s see how things have shaped up prior to the first-quarter fiscal 2023 earnings announcement.

The Trend in Estimate Revision

The Zacks Consensus Estimate for first-quarter fiscal 2023 earnings per share of $2 has witnessed one upward revision and one downward movement in the past week. The estimate is indicative of a 10.5% increase from the year-ago reported figure. Our estimate of $1.97 per share indicates 8.6% year-over-year growth. Visa beat earnings estimates in each of the trailing four quarters, delivering an average of 8.3%. This is depicted in the graph below.

Visa Inc. Price and EPS Surprise

 

Visa Inc. Price and EPS Surprise

Visa Inc. price-eps-surprise | Visa Inc. Quote

The Zacks Consensus Estimate for revenues is pegged at $7.7 billion, suggesting an 8.8% jump from the year-ago reported figure, whereas our estimate predicts an 8% increase.

What the Quantitative Model Suggests

Our proven model conclusively predicts an earnings beat for Visa this time around. 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 +0.79%. The Most Accurate Estimate is pegged at $2.02 per share, higher than the Zacks Consensus Estimate of $2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.  

Zacks Rank: Visa currently has a Zacks Rank #3.

Factors Driving Earnings

Rising travel and entertainment-related spending are expected to have driven Visa’s performance in the fiscal first quarter. The adoption of digital payments is expected to have continued in the quarter under review.

The Zacks Consensus Estimate for total volume, which consists of cash volume and payment volume (the primary lever of service revenues), indicates an increase of 5.4% from the year-ago period's reported figure. Our estimate indicates a 9% increase in the metric for the quarter under review.

As the company draws revenues as a set percentage of total transaction value every time a customer makes payments with a debit/credit card, higher spending means more revenues in the form of transaction processing fees. The consensus mark and our estimate for total payments transactions both indicate a 12.4% year-over-year increase. The metric for U.S. operations alone is expected to jump 10.7% year over year.

We expect data processing revenues to increase 8.4% year over year in the fiscal first quarter. With growth in payment volume and processed transactions, Visa’s operating efficiency is expected to have improved in first-quarter fiscal 2023. This is expected to have positioned the company for year-over-year bottom-line growth and an earnings beat.

However, rising expenses are likely to have partially offset the positive impacts of higher volumes. We expect adjusted total operating expenses for the quarter under review to increase 13.5% year over year due to increased Personnel, Network and Processing, and Professional Fees expenses.

Other Stocks That Warrant a Look

Here are some other companies from the broader 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:

TuSimple Holdings Inc. (TSP - Free Report) has an Earnings ESP of +4.09% and is currently a Zacks #2 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for TuSimple’s bottom line for the to-be-reported quarter has been unchanged over the past week. TSP beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 10.6%.

Avis Budget Group, Inc. (CAR - Free Report) has an Earnings ESP of +10.36% and a Zacks Rank of 3.

The Zacks Consensus Estimate for Avis Budget Group’s bottom line for the to-be-reported quarter is pegged at $6.66 per share, which improved 3.7% in the past 30 days. CAR beat earnings estimates in each of the past four quarters, with an average surprise of 67.2%.

FLEETCOR Technologies, Inc. has an Earnings ESP of +0.66% and a Zacks Rank of 3.

The Zacks Consensus Estimate for FLEETCOR’s bottom line for the to-be-reported quarter is pegged at $3.90 per share, indicating 4.8% year-over-year growth. FLT beat earnings estimates in each of the past four quarters, with an average surprise of 3.8%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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