Visa Inc. (V Quick QuoteV - Free Report) is set to report fourth-quarter fiscal 2024 results on Oct. 29, 2024, after the closing bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at $2.58 per shareon revenues of $9.49 billion.

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The fiscal fourth-quarter earnings estimate remained stable over the past 60 days. The bottom-line projection indicates a year-over-year increase of 10.7%. The Zacks Consensus Estimate for quarterly revenues suggests year-over-year growth of 10.2%.

For the current year, the Zacks Consensus Estimate for Visa’s revenues is pegged at $35.78 billion, implying a rise of 9.6% year over year. The consensus mark for current year EPS is pegged at $9.92, implying a jump of around 13.1% on a year-over-year basis.

Visa has a robust history of surpassing earnings estimates, beating estimates in each of the last four quarters, with the average being 2.9%???. This is depicted in the graph below:

Q4 Earnings Whispers for V

Our proven model predicts a likely earnings beat for the company 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 odds of an earnings beat. That’s precisely the case here.

Visa has an Earnings ESP of +0.23% and a Zacks Rank #3.

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What’s Shaping V’s Q4 Results?

The growing adoption and popularity of digital payment methods are likely to contribute positively to Visa's overall fiscal fourth quarter results. The Zacks Consensus Estimate projects a 6.2% increase in total Gross Dollar Volume from the previous year, while our model predicts 6.5% 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 fourth-quarter total processed transactions indicates 10.6% year-over-year growth, whereas our model predicts a 9.8% increase.

The consensus mark for total payment volumes indicates a 7% year-over-year increase, whereas our model estimate suggests nearly 6% growth. We expect the metric for U.S. operations alone to jump more than 5% year over year. Similarly, our model predicts 13.7% and 15.1% year-over-year growth in Latin America and CEMEA, respectively.

The Zacks Consensus Estimate for data processing revenues indicates 11% growth in the fiscal fourth quarter from the year-ago level of $4.26 billion, while our estimate suggests a 9.7% increase. Similarly, the consensus mark for service revenues suggests nearly 7% year-over-year growth, whereas we expect the metric to grow by 8.7%.

Furthermore, the consensus estimate for international transaction revenues indicates more than 10% 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 fourth 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 8.4% 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 $3.8 billion in the fiscal fourth quarter.

V’s Price Performance & Valuation

Visa's stock has exhibited an upward movement over the year-to-date period. However, its gain of 9% underperformed the industry’s growth of 14%. In comparison, its peers like Mastercard Incorporated (MA Quick QuoteMA - Free Report) and American Express Company (AXP Quick QuoteAXP - Free Report) have gained 20.5% and 44.8%, respectively, during this time. Additionally, Visa has lagged the S&P 500, which has rallied 22.7% during the same period.

V’s 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 25.36X forward 12 months earnings, above the industry’s average of 23.76X.

In comparison, Mastercard is even less attractively valued, trading at 31.74X forward 12 months earnings. American Express, on the other hand, is trading at 18.63X, offering a better value at the moment.

Assessing Visa’s Prospects

Visa is capitalizing on somewhat resilient consumer spending and the continued rise of e-commerce, fueling its strong growth trajectory. With a solid market position, healthy financials, increasing transaction volumes, and a focus on technological innovation, Visa is well-positioned for long-term expansion. A recent development is the launch of the Visa Tokenized Asset Platform (VTAP), allowing banks to issue and manage fiat-backed tokens, such as stablecoins, on blockchain networks. This platform enhances transaction security, programmability and interoperability.

However, Visa faces potential challenges from regulatory pressures, ongoing lawsuits, and the Credit Card Competition Act of 2023, which could impact profit margins. The Department of Justice has recently filed an antitrust lawsuit, accusing Visa of monopolizing the debit card market. Despite this, the financial impact may be spread over time due to prolongedlegal proceedings and appeals, reducing the short-term risk. Even if competition grows due to legal entanglements, Visa’s large customer base and strong infrastructure should support its continued growth.

Final Words

While Visa’s long-term growth potential looks promising, now might not be the best time to buy. Current investors can hold onto their shares and benefit from its growth initiatives. However, potential buyers may want to wait for a more favorable entry point, paying close attention to the company’s valuation, legal complications and upcoming earnings.