We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Visa (V) Pre-Q3 Earnings: Should You Buy Now or Hold Back?
Read MoreHide Full Article
Visa Inc. (V - Free Report) is set to report third-quarter fiscal 2024 results on Jul 23, 2024, after the closing bell. Growing Gross Dollar Volume, transactions and payment volumes are expected to have supported its performance.
The Zacks Consensus Estimate for fiscal third-quarter earnings is currently pegged at $2.41 per share, implying solid growth of 11.6% from the year-ago reported number. The estimate remained stable over the past week. The Zacks Consensus Estimate for fiscal third-quarter revenues is currently pegged at almost $8.9 billion, suggesting a 9.7% uptick from the year-ago actuals.
Image Source: Zacks Investment Research
Visa has a robust history of surpassing earnings estimates, beating estimates in each of the last four quarters, with the average being 3.4%. This is depicted in the graph below:
Our proven model predicts a likely earnings beat for the company this time around as well. V has an Earnings ESP of +0.51% as the Most Accurate Estimate of $2.42 per share is currently pegged higher than the Zacks Consensus Estimate of $2.41. Also, it currently has a Zacks Rank #3 (Hold). The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat, which is precisely the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors Shaping Q3 Results
Visa's fiscal third-quarter performance is expected to benefit from increased payments and cross-border volumes. The growing adoption and popularity of digital payment methods are also likely to contribute positively to Visa's overall results. The Zacks Consensus Estimate projects a more than 5% increase in total Gross Dollar Volume from the previous year, while our model predicts 7% growth.
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 Zacks Consensus Estimate for fiscal third-quarter total processed transactions indicates 9.1% year-over-year growth, whereas our model predicts a 10% increase.
The consensus mark for total payment volumes indicates an 8.1% year-over-year increase, whereas our model estimate suggests 7% growth. We expect the metric for U.S. operations alone to jump more than 6% year over year. Similarly, our model predicts 17.5% and 20.3% year-over-year growth in Latin America and CEMEA, respectively.
The Zacks Consensus Estimate for data processing revenues indicates 10.6% growth in the fiscal third quarter from the year-ago level of $4.1 billion, while our estimate predicts a 12.1% increase. Similarly, the consensus mark for service revenues suggests 8.1% year-over-year growth, whereas we expect the metric to grow by around 9%.
Furthermore, the consensus estimate for international transactionrevenues indicates more than 11% growth from a year ago, whereas our model predicts a 9% increase. Growing cross-border volumes are expected to have supported the metric.
The factors stated above are expected to have positioned the company for strong year-over-year growth and an earnings beat in the fiscal third quarter. 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 13% year over year due to increased Personnel, Marketing, Professional Fees and Network and Processing expenses. Also, both the Zacks Consensus Estimate and our model estimate for client incentives suggest that the metric will be around $3.6 billion in the fiscal third quarter.
Price Performance & Valuation
Visa's stock has exhibited an upward movement over the year-to-date period. However, its gain of 3.4% underperformed the industry’s rise of 6.4%. In comparison, its peers like Mastercard Incorporated (MA - Free Report) and American Express Company (AXP - Free Report) have increased 5.2% and 33.3%, respectively, during this time. Additionally, Visa stocks have lagged the S&P 500 significantly, which rallied 16.1% during the same period.
YTD Price Performance
Image Source: Zacks Investment Research
Now, let’s look at the value Visa offers investors at current levels.
The company’s valuation looks somewhat stretched compared with the industry average. Currently, V is trading at 24.83X forward 12 months earnings, above the industry’s average of 22.4X.
Image Source: Zacks Investment Research
In comparison, Mastercard is even less attractively valued, trading at 29.09X forward 12 months earnings. American Express, on the other hand, is trading at 17.77X, offering a better value at the moment.
Investor Considerations
Visa has benefited from resilient consumer spending and a surge in e-commerce trends, driving its rapid growth. However, its revenue growth has recently slowed to single digits. The pace of consumer spending is not expected to sustain as pandemic-era excess savings deplete, and the slowdown in real disposable income growth is likely to constrain spending on big-ticket items and discretionary areas like entertainment, travel, and dining out, potentially limiting Visa’s short-term performance.
Despite these challenges, Visa's strong market presence, robust financials, transaction growth, and technological innovation position it well for long-term growth. However, potential regulatory hurdles, ongoing lawsuits, and the Credit Card Competition Act of 2023 pose significant risks to margins.
Final Take: Maintain Your Course
While Visa’s strong fundamentalsand long-term prospects are promising, investors should avoid rushing to buy the stock. Instead, they should closely monitor the developments in consumer spending and regulatory hurdles to identify a more appropriate entry point. Those already holding V stock can maintain their position, as the upcoming earnings report is expected to reaffirm the company's strong operational performance.
Image: Bigstock
Visa (V) Pre-Q3 Earnings: Should You Buy Now or Hold Back?
Visa Inc. (V - Free Report) is set to report third-quarter fiscal 2024 results on Jul 23, 2024, after the closing bell. Growing Gross Dollar Volume, transactions and payment volumes are expected to have supported its performance.
The Zacks Consensus Estimate for fiscal third-quarter earnings is currently pegged at $2.41 per share, implying solid growth of 11.6% from the year-ago reported number. The estimate remained stable over the past week. The Zacks Consensus Estimate for fiscal third-quarter revenues is currently pegged at almost $8.9 billion, suggesting a 9.7% uptick from the year-ago actuals.
Visa has a robust history of surpassing earnings estimates, beating estimates in each of the last four quarters, with the average being 3.4%. This is depicted in the graph below:
Visa Inc. Price and EPS Surprise
Visa Inc. price-eps-surprise | Visa Inc. Quote
Q3 Earnings Whispers
Our proven model predicts a likely earnings beat for the company this time around as well. V has an Earnings ESP of +0.51% as the Most Accurate Estimate of $2.42 per share is currently pegged higher than the Zacks Consensus Estimate of $2.41. Also, it currently has a Zacks Rank #3 (Hold). The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat, which is precisely the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors Shaping Q3 Results
Visa's fiscal third-quarter performance is expected to benefit from increased payments and cross-border volumes. The growing adoption and popularity of digital payment methods are also likely to contribute positively to Visa's overall results. The Zacks Consensus Estimate projects a more than 5% increase in total Gross Dollar Volume from the previous year, while our model predicts 7% growth.
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 Zacks Consensus Estimate for fiscal third-quarter total processed transactions indicates 9.1% year-over-year growth, whereas our model predicts a 10% increase.
The consensus mark for total payment volumes indicates an 8.1% year-over-year increase, whereas our model estimate suggests 7% growth. We expect the metric for U.S. operations alone to jump more than 6% year over year. Similarly, our model predicts 17.5% and 20.3% year-over-year growth in Latin America and CEMEA, respectively.
The Zacks Consensus Estimate for data processing revenues indicates 10.6% growth in the fiscal third quarter from the year-ago level of $4.1 billion, while our estimate predicts a 12.1% increase. Similarly, the consensus mark for service revenues suggests 8.1% year-over-year growth, whereas we expect the metric to grow by around 9%.
Furthermore, the consensus estimate for international transaction revenues indicates more than 11% growth from a year ago, whereas our model predicts a 9% increase. Growing cross-border volumes are expected to have supported the metric.
The factors stated above are expected to have positioned the company for strong year-over-year growth and an earnings beat in the fiscal third quarter. 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 13% year over year due to increased Personnel, Marketing, Professional Fees and Network and Processing expenses. Also, both the Zacks Consensus Estimate and our model estimate for client incentives suggest that the metric will be around $3.6 billion in the fiscal third quarter.
Price Performance & Valuation
Visa's stock has exhibited an upward movement over the year-to-date period. However, its gain of 3.4% underperformed the industry’s rise of 6.4%. In comparison, its peers like Mastercard Incorporated (MA - Free Report) and American Express Company (AXP - Free Report) have increased 5.2% and 33.3%, respectively, during this time. Additionally, Visa stocks have lagged the S&P 500 significantly, which rallied 16.1% during the same period.
YTD Price Performance
Image Source: Zacks Investment Research
Now, let’s look at the value Visa offers investors at current levels.
The company’s valuation looks somewhat stretched compared with the industry average. Currently, V is trading at 24.83X forward 12 months earnings, above the industry’s average of 22.4X.
Image Source: Zacks Investment Research
In comparison, Mastercard is even less attractively valued, trading at 29.09X forward 12 months earnings. American Express, on the other hand, is trading at 17.77X, offering a better value at the moment.
Investor Considerations
Visa has benefited from resilient consumer spending and a surge in e-commerce trends, driving its rapid growth. However, its revenue growth has recently slowed to single digits. The pace of consumer spending is not expected to sustain as pandemic-era excess savings deplete, and the slowdown in real disposable income growth is likely to constrain spending on big-ticket items and discretionary areas like entertainment, travel, and dining out, potentially limiting Visa’s short-term performance.
Despite these challenges, Visa's strong market presence, robust financials, transaction growth, and technological innovation position it well for long-term growth. However, potential regulatory hurdles, ongoing lawsuits, and the Credit Card Competition Act of 2023 pose significant risks to margins.
Final Take: Maintain Your Course
While Visa’s strong fundamentalsand long-term prospects are promising, investors should avoid rushing to buy the stock. Instead, they should closely monitor the developments in consumer spending and regulatory hurdles to identify a more appropriate entry point. Those already holding V stock can maintain their position, as the upcoming earnings report is expected to reaffirm the company's strong operational performance.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.