Visa Inc. (V Quick QuoteV - Free Report) is set to continue its earnings beat streak in the third quarter of fiscal 2023, the results of which are expected to be released on Jul 25, after the closing bell.

What Do the Estimates Say?

The Zacks Consensus Estimate for fiscal third-quarter 2023 earnings per share of $2.10 has remained stable over the past week. The estimate is indicative of a 6.1% increase from the year-ago reported figure. Visa beat earnings estimates in all the trailing four quarters, delivering an average of 8%. This is depicted in the graph below.

The Zacks Consensus Estimate for revenues is pegged at $8.1 billion, suggesting a 10.7% jump from the year-ago reported figure.

What the Quantitative Model Suggests

Our proven model predicts a likely 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, which is precisely the case here.

Earnings ESP: Earnings ESP for the company is +0.53%. The Most Accurate Estimate is pegged at $2.12 per share, higher than the Zacks Consensus Estimate of $2.10. 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.

Before we get into what to expect in the to-be-reported quarter in detail, let’s see how the company performed in the last quarter.

Q2 Earnings Rewind

In the last reported quarter, the payments technology company’s adjusted earnings per share of $2.09 beat the Zacks Consensus Estimate by 6.1%, primarily on the back of higher payments, cross-border volumes and processed transactions. Steady cross-border travel growth and lower-than-expected client incentives aided the results, partially offset by higher costs.

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

Factors Driving Better-Than-Expected Q3 Earnings

Continued growth in travel and entertainment-related spending is expected to have driven Visa’s results in the fiscal third quarter. The growth in the adaption of digital payments is expected to have continued in the quarter under review. Our estimate for total volume, which consists of cash volume and payments volume (the primary lever of service revenues), indicates an increase of almost 4% from the year-ago level of $3,553 billion.

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. We expect total processed transactions for the fiscal third quarter to increase more than 4% year over year.

Our estimate for total payments transactions indicates a 5.6% year-over-year increase. We expect the metric for U.S. operations alone to jump 8.6% year over year. With the growth in payments volume and processed transactions, Visa’s operating efficiency is expected to have improved in the fiscal third quarter.

Our estimate for data processing revenues indicates 10% year-over-year growth in the fiscal third quarter. Also, we expect service revenues to have witnessed an almost 16% year-over-year increase. Furthermore, our estimate for international transaction revenues predicts 14% increase from the year-ago period.

The factors stated above are expected to have positioned the company for year-over-year growth in the fiscal third quarter and an earnings beat. However, rising expenses and client incentives (a contra-revenue item) are likely to have partially offset the positive impact of higher volumes.

We expect adjusted total operating expenses for the quarter under review to increase almost 11% year over year due to increased Personnel, Marketing and Professional Fees expenses. Our estimate for client incentives suggests that the metric will cross $3 billion mark in the fiscal third quarter.

Other Stocks That Warrant a Look

Here are some other companies from the broader Business Services space that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this time around:

Avis Budget Group, Inc. (CAR Quick QuoteCAR - Free Report) has an Earnings ESP of +1.46% and is a Zacks #2 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Avis Budget’s bottom line for the to-be-reported quarter is pegged at $9.78 per share, which witnessed one upward estimate revision over the past month against no movement in the opposite direction. Furthermore, the consensus mark for CAR’s revenues is pegged at $3.2 billion.

Booz Allen Hamilton Holding Corporation (BAH Quick QuoteBAH - Free Report) has an Earnings ESP of +3.20% and a Zacks Rank of 2.

The Zacks Consensus Estimate for Booz Allen’s bottom line for the to-be-reported quarter is pegged at $1.25 per share, which suggests a 10.6% year-over-year jump. BAH beat earnings estimates in all the past four quarters, with an average of 10.2%.

S&P Global Inc. (SPGI Quick QuoteSPGI - Free Report) has an Earnings ESP of +2.05% and a Zacks Rank of 2.

The Zacks Consensus Estimate for S&P Global’s bottom line for the to-be-reported quarter is pegged at $3.09 per share, indicating 10% year-over-year growth. SPGI beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 3.1%.

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