Visa Inc. (V Quick QuoteV - Free Report) is scheduled to report first-quarter fiscal 2017 (ended Dec 31, 2016) on Thursday, Feb 2, after the market closes.

The company’s fourth-quarter fiscal 2016 (ended Sep 30) adjusted earnings per share outpaced the Zacks Consensus Estimate and improved year over year as well. Results were driven by higher revenues from service, data processing as well as international transaction. On the flip side, operating expenses increased.

Over the past one year, Visa gained 12.7%. Will the rally in stock price continue post earnings release? It majorly depends on whether the firm is able to maintain its trend of beating earnings over the last four quarters.

Visa Inc. Price and EPS Surprise

Visa Inc. Price and EPS Surprise | Visa Inc. Quote

However, our quantitative model doesn’t call for an earnings beat this time around. Here is why:

A stock needs to have the right combination of the two key criteria – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least #2 (Buy) or #3 (Hold) – for increasing chances of an earnings beat. Unfortunately, this is not the case here, as elaborated below.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: The Earnings ESP for Visa is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 78 cents.

Zacks Rank: Visa’s Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of a positive earnings surprise

Factors to Influence Q1 Results

Quarterly results of Visa should benefit from strong payment volume momentum supported by the secular shift toward electronic payments at a fast pace. Results should reflect continued U.S. credit growth driven by USAA and Costco volumes.

U.S. debit growth may display stable to modest increase. Since merchants make routing decisions on the basis of incentive deals with various networks, Interlink growth rates are expected to reflect sustained volatility.

Notably, during fourth-quarter fiscal 2016, excluding Europe, cross-border constant dollar growth rate was up to 10%, marking the first double-digit cross-border volume growth since fourth-quarter fiscal 2014. The upcoming results should exhibit consistent growth driven by North America and international growth on the back of stabilizing oil prices and recovering emerging markets.

Also, transactions growth should remain healthy amid focus on several digital initiatives. During the last reported quarter, the company rolled out a service called mVisa in India, Kenya, and Rwanda, and plans to expand to several other markets globally. Further, results will likely continue to benefit from growth momentum in India. Notably, on Nov 8, 2016, the Indian government declared the two largest denomination bills invalid, thereby withdrawing around 86% of the circulating cash by value. The move encourages digital transactions in India. Payment processing giant Visa should gain from substantial rise in transactions in the quarter.

Additionally, Visa should benefit from the Visa Europe acquisition, with yield improvements, lower expenses, and EPS accretion.

However, international payments volume growth might exhibit sluggishness, stemmed by the weakness in Europe and China. Cross-border growth rates should display a downward trend, given the weakness in pound post Brexit referendum, and several struggling economies across Europe.

Further, the bottom line might reflect pressure due to increased expenses. Expenses may trend high due to Visa’s continued investment in its growth initiatives, including global expansion of Visa Checkout, Visa Token Service, and Visa Innovation Centers. Also, the quarter will include Visa Europe integration cost.

Among others, higher incentives and foreign exchange headwind might affect earnings to some extent.

Notably, the Zacks Consensus Estimate of 78 cents for the quarter reflects a year-over-year increase of 12.5%, while the revenues estimate of $4.27 billion indicates a rise of around 20%.

Stocks that Warrant a Look

Here are some stocks worth considering, as they have the right combination of elements to post an earnings beat this quarter.

CBOE Holdings, Inc. (CBOE Quick QuoteCBOE - Free Report) has an Earnings ESP of +3.45% and sports a Zacks Rank #1. The company is expected to release results around Feb 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

LPL Financial Holdings Inc. (LPLA Quick QuoteLPLA - Free Report) has an Earnings ESP of +2.78% and carries a Zacks Rank #2. It is likely to release results around Feb 9.

Moody's Corporation (MCO Quick QuoteMCO - Free Report) is expected to release results around Feb 17. It has an Earnings ESP of +0.89% and carries a Zacks Rank #3.

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