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Visa (V) Q3 Earnings Surpass Estimates, Revenues Down Y/Y
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Visa Inc. (V - Free Report) reported third-quarter fiscal 2020 earnings of $1.06 per share, which beat the Zacks Consensus Estimate by 3.92%. However, the bottom line declined 23% year over year.
Further, net operating revenues of $4.8 billion surpassed the Zacks Consensus Estimate by 0.62%. Nevertheless, the top line fell 17% year over year.
Contraction in payments volume and processed transaction, and lower cross-border revenues primarily attributable to the COVID-19 pandemic has impacted the company’s results. However, the top line was partially driven by decline in client incentives, which is a contra revenue item.
Strong Financial Performance
On a constant-dollar basis, payments volume in the quarter was down 10% year over year. Processed transactions declined 13% from the prior-year quarter to 30.7 billion.
Visa’s cross-border volumes including transactions within Europe (which drives its international transaction revenues) plunged 37% year over year on a constant-dollar basis.
Service revenues remained flat year over year at $2.4 billion on lower payments volume. On a year-over-year basis, data processing revenues declined 5% to $2.5 billion and international transaction revenues plunged 44% to $1.1 billion. Other revenues fell 8% year over year to $314 million.
Client incentives of $1.5 billion decreased 2% year over year.
Total operating expenses declined 5% year over year to $1.8 billion, primarily due to lower marketing, and general and administrative expenses.
Interest expense increased 10.9% year over year to $142 million.
Cash and cash equivalents were $13.9 billion as of Jun 30, 2020, up 77.3% from the level as of Sep 30, 2019.
Total assets were $77.9 billion as of Jun 30, 2020, up 7.3% from the prior-year comparable period.
Share Buyback and Dividend Update
During the quarter, the company made share repurchases to the tune of $0.9 billion.
On Jul 20, 2020, the company declared a quarterly cash dividend of 30 cents per share, payable Sep 1, 2020 to its shareholders of record as of Aug 14, 2020.
Developments During the Quarter
On Apr 2, 2020, Visa issued fixed-rate senior notes worth $4 billion, the proceeds from which will be utilized for general corporate purposes.
Our Take
The COVID-19-induced business disruption has eroded the company’s payment volumes and processed transactions. Further, its cross-border revenues have been affected by the spending cuts due to the pandemic.
Nevertheless, management recently informed that the company’s business is showing signs of recovery, driven by a rise in spending owing to relaxation in shelter-in-place restrictions, which were earlier enforced to limit the spread of the coronavirus.
We believe that the company’s strong brand name, vast business network, global presence, investment in technology, several alliances and acquisitions will help it tide over the current economic volatility.
Some other companies in the same sector that already released respective results are American Express Co. (AXP - Free Report) and Synchrony Financial (SYF - Free Report) , which beat earnings estimates by 123.1% and 50%, respectively. Meanwhile, Discover Financial Services’ (DFS - Free Report) bottom line missed the mark by 2500%.
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Visa (V) Q3 Earnings Surpass Estimates, Revenues Down Y/Y
Visa Inc. (V - Free Report) reported third-quarter fiscal 2020 earnings of $1.06 per share, which beat the Zacks Consensus Estimate by 3.92%. However, the bottom line declined 23% year over year.
Further, net operating revenues of $4.8 billion surpassed the Zacks Consensus Estimate by 0.62%. Nevertheless, the top line fell 17% year over year.
Contraction in payments volume and processed transaction, and lower cross-border revenues primarily attributable to the COVID-19 pandemic has impacted the company’s results. However, the top line was partially driven by decline in client incentives, which is a contra revenue item.
Strong Financial Performance
On a constant-dollar basis, payments volume in the quarter was down 10% year over year. Processed transactions declined 13% from the prior-year quarter to 30.7 billion.
Visa’s cross-border volumes including transactions within Europe (which drives its international transaction revenues) plunged 37% year over year on a constant-dollar basis.
Service revenues remained flat year over year at $2.4 billion on lower payments volume. On a year-over-year basis, data processing revenues declined 5% to $2.5 billion and international transaction revenues plunged 44% to $1.1 billion. Other revenues fell 8% year over year to $314 million.
Client incentives of $1.5 billion decreased 2% year over year.
Total operating expenses declined 5% year over year to $1.8 billion, primarily due to lower marketing, and general and administrative expenses.
Interest expense increased 10.9% year over year to $142 million.
Visa Inc. Price, Consensus and EPS Surprise
Visa Inc. price-consensus-eps-surprise-chart | Visa Inc. Quote
Solid Balance Sheet
Cash and cash equivalents were $13.9 billion as of Jun 30, 2020, up 77.3% from the level as of Sep 30, 2019.
Total assets were $77.9 billion as of Jun 30, 2020, up 7.3% from the prior-year comparable period.
Share Buyback and Dividend Update
During the quarter, the company made share repurchases to the tune of $0.9 billion.
On Jul 20, 2020, the company declared a quarterly cash dividend of 30 cents per share, payable Sep 1, 2020 to its shareholders of record as of Aug 14, 2020.
Developments During the Quarter
On Apr 2, 2020, Visa issued fixed-rate senior notes worth $4 billion, the proceeds from which will be utilized for general corporate purposes.
Our Take
The COVID-19-induced business disruption has eroded the company’s payment volumes and processed transactions. Further, its cross-border revenues have been affected by the spending cuts due to the pandemic.
Nevertheless, management recently informed that the company’s business is showing signs of recovery, driven by a rise in spending owing to relaxation in shelter-in-place restrictions, which were earlier enforced to limit the spread of the coronavirus.
We believe that the company’s strong brand name, vast business network, global presence, investment in technology, several alliances and acquisitions will help it tide over the current economic volatility.
Zacks Rank & Performance of Other Players
Visa carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some other companies in the same sector that already released respective results are American Express Co. (AXP - Free Report) and Synchrony Financial (SYF - Free Report) , which beat earnings estimates by 123.1% and 50%, respectively. Meanwhile, Discover Financial Services’ (DFS - Free Report) bottom line missed the mark by 2500%.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained an impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>