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Visa (V) Q3 Earnings and Revenues Beat, Updates Guidance
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Visa Inc. (V - Free Report) reported third-quarter fiscal 2018 (ended Jun 30, 2018) earnings of $1.20 per share, beating the Zacks Consensus Estimate by 11.11%. Also, the bottom line improved 39% year over year.
Results were driven by growth in payments volume, cross-border volume and processed transactions.
Net operating revenues of $5.2 billion surpassed the Zacks Consensus Estimate of $5.08 billion. Also, revenues climbed 1.5% year over year. This upside was primarily driven by consistent growth in payments volume, cross-border volume and processed transactions.
On a constant dollar basis, payments volume growth for the fiscal third quarter improved 11%, year over year to $2.1 trillion. Cross-border volume growth, on a constant dollar basis, was 10%. Visa's processed transactions increased 12% over the prior year to 31.7 billion.
Service revenues increased 13% year over year to $2.2 billion on higher nominal payments volume recognized on payments volume in the prior quarter.
Notably, other revenue components are based on the reported quarter’s activity. Data processing revenues were up 19% on a year-over-year basis to $2.4 billion, while international transaction revenues grew 16% to $1.8 billion. Other revenues increased 9% year over year to $229 million.
Client incentives of $1.4 billion increased 19.7% year over year and represented 20.8% of gross revenues in the reported quarter.
Adjusted operating expenses increased 10.4% year over year to $1.76 billion, primarily due to higher marketing expenses and depreciation and amortization expense. Interest expense increased 10.7% year over year to $155 million.
Exchange rate shifts from the prior year positively impacted earnings per share growth by approximately 1.5 percentage points.
Balance Sheet Strengthens
Cash, cash equivalents and available-for-sale investment securities were $14.6 billion as of Jun 30, 2018, down 13.9% from Sep 30, 2017.
Total assets were $68.2 billion as of Jun 30, 2018, up 0.3% from fiscal 2017 ended Sep 30, 2017.
Share Repurchase and Dividend Update
During the reported quarter, the company repurchased shares worth $1.8 billion and paid out dividend of $487 billion.
2018 Guidance Update
Visa kept intact its 2018 guidance provided earlier for the below metrics: The company expects annual net revenue growth in low double digits on a nominal basis, with approximately 1% of positive foreign currency impact.
Client incentives, as a percentage of gross revenues, are expected in the range of 21.5-22%.
Annual operating expense growth in high teens on a GAAP basis and low double-digits adjusted for special items in fiscal 2017 and 2018. Annual operating margin is expected in mid-60% on a GAAP basis and high 60% adjusted for a special item for fiscal 2018.
Visa updated the guidance for the following items:
Visa estimates GAAP and effective tax rate of 20.5% to 21.5%, respectively, versus the earlier expectation of 21% to 22%.
The company projected earnings per share (EPS) growth of high-50s (versus mid-60s earlier) on a GAAP nominal dollar basis and low 30s (high-20s) on an adjusted, non-GAAP basis (EPS includes approximately 1.5% of positive foreign currency impact and 9% to 10% of benefit from tax reform).
Our Take
Visa’s results reflect robust performance. The company remains well positioned for growth on the back of a solid market position, increase in payment volumes, accretive acquisitions and significant opportunities from its secular shift toward electronic payments.
Among the other players in the same space, American Express Co. (AXP - Free Report) , Capital One Financial Corp. (COF - Free Report) and Alliance Data Systems Corp. beat earnings by 0.55%, 22.4% and 11.11%, respectively, in the April-June 2018 quarter.
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Visa (V) Q3 Earnings and Revenues Beat, Updates Guidance
Visa Inc. (V - Free Report) reported third-quarter fiscal 2018 (ended Jun 30, 2018) earnings of $1.20 per share, beating the Zacks Consensus Estimate by 11.11%. Also, the bottom line improved 39% year over year.
Results were driven by growth in payments volume, cross-border volume and processed transactions.
Visa Inc. Price, Consensus and EPS Surprise
Visa Inc. Price, Consensus and EPS Surprise | Visa Inc. Quote
Strong Performance
Net operating revenues of $5.2 billion surpassed the Zacks Consensus Estimate of $5.08 billion. Also, revenues climbed 1.5% year over year. This upside was primarily driven by consistent growth in payments volume, cross-border volume and processed transactions.
On a constant dollar basis, payments volume growth for the fiscal third quarter improved 11%, year over year to $2.1 trillion. Cross-border volume growth, on a constant dollar basis, was 10%. Visa's processed transactions increased 12% over the prior year to 31.7 billion.
Service revenues increased 13% year over year to $2.2 billion on higher nominal payments volume recognized on payments volume in the prior quarter.
Notably, other revenue components are based on the reported quarter’s activity. Data processing revenues were up 19% on a year-over-year basis to $2.4 billion, while international transaction revenues grew 16% to $1.8 billion. Other revenues increased 9% year over year to $229 million.
Client incentives of $1.4 billion increased 19.7% year over year and represented 20.8% of gross revenues in the reported quarter.
Adjusted operating expenses increased 10.4% year over year to $1.76 billion, primarily due to higher marketing expenses and depreciation and amortization expense. Interest expense increased 10.7% year over year to $155 million.
Exchange rate shifts from the prior year positively impacted earnings per share growth by approximately 1.5 percentage points.
Balance Sheet Strengthens
Cash, cash equivalents and available-for-sale investment securities were $14.6 billion as of Jun 30, 2018, down 13.9% from Sep 30, 2017.
Total assets were $68.2 billion as of Jun 30, 2018, up 0.3% from fiscal 2017 ended Sep 30, 2017.
Share Repurchase and Dividend Update
During the reported quarter, the company repurchased shares worth $1.8 billion and paid out dividend of $487 billion.
2018 Guidance Update
Visa kept intact its 2018 guidance provided earlier for the below metrics:
The company expects annual net revenue growth in low double digits on a nominal basis, with approximately 1% of positive foreign currency impact.
Client incentives, as a percentage of gross revenues, are expected in the range of 21.5-22%.
Annual operating expense growth in high teens on a GAAP basis and low double-digits adjusted for special items in fiscal 2017 and 2018.
Annual operating margin is expected in mid-60% on a GAAP basis and high 60% adjusted for a special item for fiscal 2018.
Visa updated the guidance for the following items:
Visa estimates GAAP and effective tax rate of 20.5% to 21.5%, respectively, versus the earlier expectation of 21% to 22%.
The company projected earnings per share (EPS) growth of high-50s (versus mid-60s earlier) on a GAAP nominal dollar basis and low 30s (high-20s) on an adjusted, non-GAAP basis (EPS includes approximately 1.5% of positive foreign currency impact and 9% to 10% of benefit from tax reform).
Our Take
Visa’s results reflect robust performance. The company remains well positioned for growth on the back of a solid market position, increase in payment volumes, accretive acquisitions and significant opportunities from its secular shift toward electronic payments.
Zacks Rank
Visa carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Peer Releases
Among the other players in the same space, American Express Co. (AXP - Free Report) , Capital One Financial Corp. (COF - Free Report) and Alliance Data Systems Corp. beat earnings by 0.55%, 22.4% and 11.11%, respectively, in the April-June 2018 quarter.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>