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Visa (V) Up 7.1% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Visa (V - Free Report) . Shares have added about 7.1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Visa due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Visa Q4 Earnings Beat on Cross-Border Volume, Dividend Hiked
Visa reported solid fourth-quarter fiscal 2023 results, driven by increased payments, cross-border volumes and processed transactions. Steady cross-border travel growth, resilient consumer spending and higher-than-expected data processing aided the results, partially offset by increased costs and client incentives.
It reported fourth-quarter fiscal 2023 earnings of $2.33 per share, which beat the Zacks Consensus Estimate of $2.23 by 4.5%. The bottom line improved 21% year over year.
Net revenues amounted to $8.6 million, which advanced 11% year over year in the quarter under review. The top line outpaced the consensus mark by 0.7%.
Q4 Business Drivers
Visa’s payments volume grew 9% year over year on a constant-dollar basis in the fiscal fourth quarter, backed by strength in Europe, CEMEA and LAC regions. Processed transactions (implying transactions processed by Visa) totaled 56 billion, which rose 10% year over year and beat our model estimate of 55.5 billion.
On a constant-dollar basis, the cross-border volume of Visa climbed 16% year over year in the quarter under review. Excluding transactions within Europe, its cross-border volume (that boosts a company’s international transaction revenues) advanced 18% year over year on a constant-dollar basis.
Q4 Operational Performance
Service revenues improved 12% year over year to $3.9 billion during the September quarter on the back of better payment volumes in the prior quarter. The metric was only 1.8% lower than our estimate. V’s data processing revenues of $4.3 billion grew 13% year over year in the quarter under review, beating our estimate of $4.2 billion.
International transaction revenues advanced 10% year over year to $3.2 billion, which met our estimate on higher cross-border volume. Other revenues of $744 million jumped 35% year over year and beat our estimate by 12.4%.
Client incentives (a contra-revenue item) of Visa escalated 20% year over year to $3.4 billion in the quarter under review and met our estimate. The metric amounted to 28.5% of the company’s gross revenues of $12 billion.
Total adjusted operating expenses of $2.9 billion increased 9% year over year and were marginally higher than our estimate of $2.8 billion. The increase was due to elevated personnel costs, network and processing, G&A and professional fees. Interest expense came in at $183 million, up 15.1% year over year.
Balance Sheet (as of Sep 30, 2023)
Visa exited the September quarter with cash and cash equivalents of $16.3 billion, which increased from the 2022 fiscal year-end level of $15.7 billion.
Total assets of $90.5 billion increased from the 2022 fiscal year-end level of $85.5 billion.
V’s long-term debt amounted to $20.5 billion, which inched up from the fiscal year-end level of $20.2 billion.
Total equity grew from the 2022 fiscal year-end level of $35.6 billion to $38.7 billion.
Cash Flows
Visa generated net cash from operations of $20.8 billion in fiscal 2023, which increased from $18.8 billion a year ago. Fiscal fourth-quarter free cash flows of $6.6 billion rose from $5.6 billion a year ago.
Capital Deployment Update
Visa rewarded $5 billion to shareholders via share buybacks of almost $4.1 billion and dividends of $928 million in the September quarter. V had authorized funds of $4.7 billion remaining under its share buyback program as of Sep 30, 2023. It also introduced a new repurchase program of $25 billion in October.
Management sanctioned a quarterly cash dividend of 52 cents per share (a 16% increase from the prior quarter), which will be paid out on Dec 1, 2023, to shareholders of record as of Nov 9, 2023.
Outlook
The company anticipates (non-GAAP) net revenue growth in fiscal 2024, ranging from high single digits to low double digits in nominal dollars. Non-GAAP operating expense for the year is expected to increase high single digit. Non-GAAP EPS growth in nominal dollars is expected in the low teens.
Amortization of acquired intangible assets is expected at $150 million or 6 cents per share. Acquisition-related costs are expected at around $80 million or 3 cents per share.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
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.
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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Visa (V) Up 7.1% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Visa (V - Free Report) . Shares have added about 7.1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Visa due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Visa Q4 Earnings Beat on Cross-Border Volume, Dividend Hiked
Visa reported solid fourth-quarter fiscal 2023 results, driven by increased payments, cross-border volumes and processed transactions. Steady cross-border travel growth, resilient consumer spending and higher-than-expected data processing aided the results, partially offset by increased costs and client incentives.
It reported fourth-quarter fiscal 2023 earnings of $2.33 per share, which beat the Zacks Consensus Estimate of $2.23 by 4.5%. The bottom line improved 21% year over year.
Net revenues amounted to $8.6 million, which advanced 11% year over year in the quarter under review. The top line outpaced the consensus mark by 0.7%.
Q4 Business Drivers
Visa’s payments volume grew 9% year over year on a constant-dollar basis in the fiscal fourth quarter, backed by strength in Europe, CEMEA and LAC regions. Processed transactions (implying transactions processed by Visa) totaled 56 billion, which rose 10% year over year and beat our model estimate of 55.5 billion.
On a constant-dollar basis, the cross-border volume of Visa climbed 16% year over year in the quarter under review. Excluding transactions within Europe, its cross-border volume (that boosts a company’s international transaction revenues) advanced 18% year over year on a constant-dollar basis.
Q4 Operational Performance
Service revenues improved 12% year over year to $3.9 billion during the September quarter on the back of better payment volumes in the prior quarter. The metric was only 1.8% lower than our estimate. V’s data processing revenues of $4.3 billion grew 13% year over year in the quarter under review, beating our estimate of $4.2 billion.
International transaction revenues advanced 10% year over year to $3.2 billion, which met our estimate on higher cross-border volume. Other revenues of $744 million jumped 35% year over year and beat our estimate by 12.4%.
Client incentives (a contra-revenue item) of Visa escalated 20% year over year to $3.4 billion in the quarter under review and met our estimate. The metric amounted to 28.5% of the company’s gross revenues of $12 billion.
Total adjusted operating expenses of $2.9 billion increased 9% year over year and were marginally higher than our estimate of $2.8 billion. The increase was due to elevated personnel costs, network and processing, G&A and professional fees. Interest expense came in at $183 million, up 15.1% year over year.
Balance Sheet (as of Sep 30, 2023)
Visa exited the September quarter with cash and cash equivalents of $16.3 billion, which increased from the 2022 fiscal year-end level of $15.7 billion.
Total assets of $90.5 billion increased from the 2022 fiscal year-end level of $85.5 billion.
V’s long-term debt amounted to $20.5 billion, which inched up from the fiscal year-end level of $20.2 billion.
Total equity grew from the 2022 fiscal year-end level of $35.6 billion to $38.7 billion.
Cash Flows
Visa generated net cash from operations of $20.8 billion in fiscal 2023, which increased from $18.8 billion a year ago. Fiscal fourth-quarter free cash flows of $6.6 billion rose from $5.6 billion a year ago.
Capital Deployment Update
Visa rewarded $5 billion to shareholders via share buybacks of almost $4.1 billion and dividends of $928 million in the September quarter. V had authorized funds of $4.7 billion remaining under its share buyback program as of Sep 30, 2023. It also introduced a new repurchase program of $25 billion in October.
Management sanctioned a quarterly cash dividend of 52 cents per share (a 16% increase from the prior quarter), which will be paid out on Dec 1, 2023, to shareholders of record as of Nov 9, 2023.
Outlook
The company anticipates (non-GAAP) net revenue growth in fiscal 2024, ranging from high single digits to low double digits in nominal dollars. Non-GAAP operating expense for the year is expected to increase high single digit. Non-GAAP EPS growth in nominal dollars is expected in the low teens.
Amortization of acquired intangible assets is expected at $150 million or 6 cents per share. Acquisition-related costs are expected at around $80 million or 3 cents per share.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
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.
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.