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Will Visa's (V) Q1 Earnings Benefit From Revenue Growth?

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Visa Inc. (V - Free Report) is scheduled to report first-quarter fiscal 2020 results on Jan 30. For the to-be-reported quarter, the Zacks Consensus Estimate for total revenues is pegged at $6.06 billion, indicating a 10.1% increase from the year-ago reported figure. The consensus mark for earnings per share stands at $1.46, indicating a rise of 12.3% from the prior-year reported number.

Visa is likely to have retained its revenue momentum in the first quarter on the back of strong market position and attractive core business that are steadily driven by new deals, renewed agreements, accretive acquisitions, increasing spending via cards, shift to digital form of payments and expansion of service offerings.

Revenues are likely to have gained from higher payments volumes, cross-border volumes and processed transactions.

Service Revenues (34% of total revenues), constituting the support services provided to clients for usage of the company’s products, are aided by payments volumes. The Zacks Consensus Estimate for revenues from this business line suggests 11.5% increase to $2.61 billion from the year-earlier reported figure.

Data Processing revenues depend on the number of transactions processed. Visa generates these revenues by authorizing, clearing, settling, providing network access and other services for the transactions processed.

The Zacks Consensus Estimate for revenues from this business line is pegged at $2.85 billion, indicating an increase of 15.2% from the year-ago reported figure on an expected 12.5% improvement in processed transactions to 49.9 billion.

International Transaction Revenues (28%) are likely to have benefited from an increase in cross-border transactions, which are expected to climb 9.8% year over year to $2.03 billion, led by higher transactions in Europe, Asia Pacific, CEMEA and LAC.

However, Visa’s revenues might have been offset to some extent by a rise in client incentives, rewarded to financial institutions and merchants to increase acceptance of its products and drive payment volumes on its network. This is a contra revenue item and has been on the rise for the last several quarters.

Operating expenses are expected to have increased, induced by higher personnel and marketing costs.

Visa is making significant investments in business initiatives and strategic priorities, which include investments in its employees and digital products, technological operations plus merchant solutions to position itself for long-term sustainable growth. This might have resulted in elevated expense levels in the to-be-reported quarter and dragged down margins to some extent.

However, the bottom line is expected to have gained from the company’s share buyback.

Earnings Surprise History

The company boasts an attractive positive earnings surprise history, having surpassed estimates in the trailing four quarters, the beat being 3.87%, on average. This is depicted in the chart below:

Visa Inc. Price and EPS Surprise

Here is what our quantitative model predicts:

Our proven model does not conclusively predict an 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 odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with ou rEarnings ESP Filter.

Visa has an Earnings ESP of -0.43% and a Zacks Rank #3.

Stocks That Warrant a Look

Here are a few finance stocks that you may want to consider as our model shows that these have the right combination of elements to beat on earnings in the upcoming releases.

Global Payments Inc. (GPN - Free Report) has an Earnings ESP of +3.15% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Fidelity Information Services, Inc. (FIS - Free Report) has an Earnings ESP of +0.45% and a Zacks Rank #2.

Square, Inc. (SQ - Free Report) has an Earnings ESP of +6.14% and a Zacks Rank #3.


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