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Why Is Visa (V) Down 0.3% Since Last Earnings Report?
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A month has gone by since the last earnings report for Visa (V - Free Report) . Shares have lost about 0.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Visa due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Visa (V - Free Report) Q3 Earnings and Revenues Beat, Updates Guidance
Visa 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.
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).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, Visa has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than momentum investors.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Visa has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Visa (V) Down 0.3% Since Last Earnings Report?
A month has gone by since the last earnings report for Visa (V - Free Report) . Shares have lost about 0.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Visa due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Visa (V - Free Report) Q3 Earnings and Revenues Beat, Updates Guidance
Visa 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.
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).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, Visa has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than momentum investors.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Visa has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.