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Visa (V) Q3 Earnings Beat on Processed Transactions, Sales Miss
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Visa Inc. (V - Free Report) reported strong third-quarter fiscal 2024 earnings, which benefited from expanding processed transactions and cross-border volume. Its earnings per share (EPS) of $2.42 outpaced the Zacks Consensus Estimate by a penny. The bottom line rose 12% year over year. However, higher operating expenses and client incentives partially tempered the upside.
Net revenues improved 10% year over year to $8.9 billion in the quarter under review. However, the top line missed the consensus mark by 0.1%, a rare feat for the payments juggernaut. Lower-spend consumer category, having decreased disposable income, is cutting back on spending. Concerns regarding cooling consumer spending growth, especially in high-ticket and discretionary items, are likely to keep the stock under pressure.
Visa's payments volume increased 7% year over year on a constant-dollar basis in the fiscal third quarter, attributable to expanding operations across Canada, Europe, CEMEA, United States and LAC regions. But it missed the Zacks Consensus Estimate by 2.9% and our model estimate by 2%. Processed transactions (implying transactions processed by Visa) grew 10% year over year to 59.3 billion and beat the consensus estimate by 0.6%.
On a constant-dollar basis, the cross-border volume of Visa climbed 14% year over year in the quarter under review. Excluding transactions within Europe, its cross-border volume (that boosts a company’s international transaction revenues) also rose 14% year over year on a constant-dollar basis.
Q3 Operational Performance
Service revenues (depending on payments volume in the previous quarter) of $4 billion grew 8% year over year in the June quarter on the back of increased payment volumes and met our model estimate. Data processing revenues of the company climbed 9% year over year to almost $4.5 billion, which marginally missed both the Zacks Consensus Estimate and our estimate.
International transaction revenues amounted to almost $3.2 billion, which improved 9% year over year in the fiscal third quarter. The metric benefited from increased cross-border volume and met our model estimate but missed the consensus mark by 1.7%. Other revenues rose 31% year over year to $780 million, which beat the Zacks Consensus Estimate and our estimate by around 6.9% and 9%, respectively.
Client incentives (a contra-revenue item) escalated 11% year over year to $3.5 billion in the quarter under review but were lower than both the Zacks Consensus Estimate and our estimate of $3.6 billion. The metric accounted for 28.4% of the company’s gross revenues of $12.4 billion.
Adjusted operating expenses of Visa increased 14% year over year to $2.9 billion in the fiscal third quarter due to higher personnel, marketing, network and processing, professional feesand G&A expenses. Interest expenses of $196 million rose from $182 million reported in the year-ago period.
Balance Sheet (as of Jun 30, 2024)
Visa exited the June quarter with cash and cash equivalents of $12.9 billion, which fell from the fiscal 2023 year-end level of $16.3 billion. Total assets of $91 billion rose from $90.5 billion in the fiscal 2023 year-end level.
Visa’s long-term debt amounted to $20.6 billion, which inched up from the fiscal 2023 year-end level of $20.5 billion.
Total equity of $39.7 billion increased from the fiscal 2023 year-end figure of $38.7 billion.
Cash Flows
The company generated net cash from operations of $5.1 billion in the fiscal third quarter, which declined from $5.8 billion a year ago. Free cash flows are recorded at $4.7 billion, down from $5.5 billion in the year-ago period.
Capital Deployment Update
Visa rewarded $5.83 billion to shareholders via share buybacks ($4.77 billion) and dividends ($1.06 billion) in the March quarter. V had leftover authorized funds of $18.9 billion under its repurchase program as of Jun 30, 2024.
On Jul 23, 2024, management sanctioned a quarterly cash dividend of 52 cents per share, which will be paid out on Sep 3 to shareholders of record as of Aug 9.
Fiscal 4Q24 Outlook
On an adjusted constant-dollar basis, net revenues are anticipated to witness low double-digit growth. Operating expenses are estimated to grow by high single digits on an adjusted constant-dollar basis. It expects EPS to witness the high end of low double-digit growth.
Fiscal 2024 View
Management continues to expect net revenues to grow in low double digits on an adjusted constant-dollar basis in fiscal 2024. Operating expense is expected to witness high single-digit to low double-digit growth on an adjusted constant-dollar basis. It also anticipates EPS to witness growth in the low teens.
Amortization of acquired intangible assets is projected at around $180 million or 7 cents per share. Acquisition-related costs are expected at roughly $105 million or 5 cents per share.
The Zacks Consensus Estimate for MoneyLion’s current-year bottom line indicates a 131.3% year-over-year improvement. The consensus estimate for ML’s current-year top line is pegged at $524.8 million, suggesting 23.9% year-over-year growth.
The Zacks Consensus Estimate for S&P Global’s current year earnings is pegged at $14.27 per share, which indicates a 13.3% year-over-year improvement. SPGI beat earnings estimates in two of the trailing four quarters, met once and missed on the other occasion, with an average surprise of 3.4%. The consensus estimate for current-year revenues suggests 8.3% year-over-year growth.
The Zacks Consensus Estimate for Shift4 Payments’ current-year earnings is pegged at $3.86 per share, which indicates 36.4% growth from the year-ago period. FOUR beat earnings estimates in two of the trailing four quarters and missed on other occasions, with an average surprise of 12.3%. The consensus mark for current-year revenues suggests a 40.8% year-over-year increase.
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Visa (V) Q3 Earnings Beat on Processed Transactions, Sales Miss
Visa Inc. (V - Free Report) reported strong third-quarter fiscal 2024 earnings, which benefited from expanding processed transactions and cross-border volume. Its earnings per share (EPS) of $2.42 outpaced the Zacks Consensus Estimate by a penny. The bottom line rose 12% year over year. However, higher operating expenses and client incentives partially tempered the upside.
Net revenues improved 10% year over year to $8.9 billion in the quarter under review. However, the top line missed the consensus mark by 0.1%, a rare feat for the payments juggernaut. Lower-spend consumer category, having decreased disposable income, is cutting back on spending. Concerns regarding cooling consumer spending growth, especially in high-ticket and discretionary items, are likely to keep the stock under pressure.
Visa Inc. Price, Consensus and EPS Surprise
Visa Inc. price-consensus-eps-surprise-chart | Visa Inc. Quote
Business Drivers
Visa's payments volume increased 7% year over year on a constant-dollar basis in the fiscal third quarter, attributable to expanding operations across Canada, Europe, CEMEA, United States and LAC regions. But it missed the Zacks Consensus Estimate by 2.9% and our model estimate by 2%. Processed transactions (implying transactions processed by Visa) grew 10% year over year to 59.3 billion and beat the consensus estimate by 0.6%.
On a constant-dollar basis, the cross-border volume of Visa climbed 14% year over year in the quarter under review. Excluding transactions within Europe, its cross-border volume (that boosts a company’s international transaction revenues) also rose 14% year over year on a constant-dollar basis.
Q3 Operational Performance
Service revenues (depending on payments volume in the previous quarter) of $4 billion grew 8% year over year in the June quarter on the back of increased payment volumes and met our model estimate. Data processing revenues of the company climbed 9% year over year to almost $4.5 billion, which marginally missed both the Zacks Consensus Estimate and our estimate.
International transaction revenues amounted to almost $3.2 billion, which improved 9% year over year in the fiscal third quarter. The metric benefited from increased cross-border volume and met our model estimate but missed the consensus mark by 1.7%. Other revenues rose 31% year over year to $780 million, which beat the Zacks Consensus Estimate and our estimate by around 6.9% and 9%, respectively.
Client incentives (a contra-revenue item) escalated 11% year over year to $3.5 billion in the quarter under review but were lower than both the Zacks Consensus Estimate and our estimate of $3.6 billion. The metric accounted for 28.4% of the company’s gross revenues of $12.4 billion.
Adjusted operating expenses of Visa increased 14% year over year to $2.9 billion in the fiscal third quarter due to higher personnel, marketing, network and processing, professional feesand G&A expenses. Interest expenses of $196 million rose from $182 million reported in the year-ago period.
Balance Sheet (as of Jun 30, 2024)
Visa exited the June quarter with cash and cash equivalents of $12.9 billion, which fell from the fiscal 2023 year-end level of $16.3 billion. Total assets of $91 billion rose from $90.5 billion in the fiscal 2023 year-end level.
Visa’s long-term debt amounted to $20.6 billion, which inched up from the fiscal 2023 year-end level of $20.5 billion.
Total equity of $39.7 billion increased from the fiscal 2023 year-end figure of $38.7 billion.
Cash Flows
The company generated net cash from operations of $5.1 billion in the fiscal third quarter, which declined from $5.8 billion a year ago. Free cash flows are recorded at $4.7 billion, down from $5.5 billion in the year-ago period.
Capital Deployment Update
Visa rewarded $5.83 billion to shareholders via share buybacks ($4.77 billion) and dividends ($1.06 billion) in the March quarter. V had leftover authorized funds of $18.9 billion under its repurchase program as of Jun 30, 2024.
On Jul 23, 2024, management sanctioned a quarterly cash dividend of 52 cents per share, which will be paid out on Sep 3 to shareholders of record as of Aug 9.
Fiscal 4Q24 Outlook
On an adjusted constant-dollar basis, net revenues are anticipated to witness low double-digit growth. Operating expenses are estimated to grow by high single digits on an adjusted constant-dollar basis. It expects EPS to witness the high end of low double-digit growth.
Fiscal 2024 View
Management continues to expect net revenues to grow in low double digits on an adjusted constant-dollar basis in fiscal 2024. Operating expense is expected to witness high single-digit to low double-digit growth on an adjusted constant-dollar basis. It also anticipates EPS to witness growth in the low teens.
Amortization of acquired intangible assets is projected at around $180 million or 7 cents per share. Acquisition-related costs are expected at roughly $105 million or 5 cents per share.
Zacks Rank & Key Picks
Visa currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Business Services space are MoneyLion Inc. (ML - Free Report) , S&P Global Inc. (SPGI - Free Report) and Shift4 Payments, Inc. (FOUR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for MoneyLion’s current-year bottom line indicates a 131.3% year-over-year improvement. The consensus estimate for ML’s current-year top line is pegged at $524.8 million, suggesting 23.9% year-over-year growth.
The Zacks Consensus Estimate for S&P Global’s current year earnings is pegged at $14.27 per share, which indicates a 13.3% year-over-year improvement. SPGI beat earnings estimates in two of the trailing four quarters, met once and missed on the other occasion, with an average surprise of 3.4%. The consensus estimate for current-year revenues suggests 8.3% year-over-year growth.
The Zacks Consensus Estimate for Shift4 Payments’ current-year earnings is pegged at $3.86 per share, which indicates 36.4% growth from the year-ago period. FOUR beat earnings estimates in two of the trailing four quarters and missed on other occasions, with an average surprise of 12.3%. The consensus mark for current-year revenues suggests a 40.8% year-over-year increase.