Affirm (AFRM) to Post Q4 Earnings: What You Should Expect
Affirm Holdings, Inc. AFRM is set to report its fourth-quarter fiscal 2023 results on Aug 24, after the closing bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for fourth-quarter fiscal 2023 loss per share of 86 cents suggests a 32.3% plunge from the prior-year loss of 65 cents. The estimate remained stable over the past week. The consensus estimate for fourth-quarter fiscal 2023 revenues of $404.2 million indicates an 11% increase from the year-ago reported figure.
Affirm beat on earnings in one of the trailing four quarters and missed thrice, the average negative surprise being 8.5%. This is depicted in the graph below.
Affirm Holdings, Inc. Price and EPS Surprise
Affirm Holdings, Inc. price-eps-surprise | Affirm Holdings, Inc. Quote
Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at AFRM’s previous-quarter performance first.
Q3 Earnings Rewind
In the last reported quarter, this leading payment network’s adjusted loss per share of 69 cents was 24.2% narrower than the Zacks Consensus Estimate, thanks to improved virtual card network revenues and interest income. However, the positives were partially offset by deteriorated servicing and merchant network revenues and rising operating expenses.
Now, let’s see how things have shaped up prior to the fourth-quarter fiscal 2023 earnings announcement.
Q4 Factors to Note
The company expects the weighted average shares outstanding to be 300 million in the to-be-reported quarter. Travel and entertainment-related spendings are expected to have been resilient in the quarter under review. This, in turn, is likely to have augmented the strength of active merchants and consumers.
The Zacks Consensus Estimate for merchant network revenues is pegged at $130.1 million, indicating a jump of 10.1% from a year ago. Also, the consensus mark for servicing income indicates a 4.4% year-over-year increase to $22.5 million.
The sales figures from the virtual card networks are anticipated to have risen. The Zacks Consensus Estimate for virtual card network revenues is pegged at $32.6 million, indicating a 3.3% year-over-year rise. Affirm anticipates fourth-quarter fiscal 2023 GMV to be $5.20-$5.35 billion, signaling a jump from $4.4 billion a year ago.
The consensus mark for interest income in the fiscal fourth quarter is pegged at $186.6 million, indicating a 35.6% jump from the previous-year quarter’s $137.6 million, primarily due to the high interest rate environment.
The above-mentioned factors are expected to have positioned the company for year-over-year top-line growth in the fiscal fourth quarter. However, the positives are likely to have been partially offset by lower gains on sales of loans and higher operating costs.
The Zacks Consensus Estimate for gain on sales of loans suggests a 41.5% year-over-year decline to $32.4 million. The company expects transaction costs to be within $245-$255 million, significantly higher than the year-ago level of $179.8 million.
Also, operating costs are likely to have increased in the quarter under review due to higher technology and data analytics, and funding costs, affecting the bottom line. Increased processing and servicing costs, as a result of growing volumes, are anticipated to have boosted the operating costs, reducing profits and making an earnings beat uncertain.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Affirm this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: The company currently has an Earnings ESP of -18.15%. This is because the Most Accurate Estimate currently stands at a loss of $1.02 per share, wider than the Zacks Consensus Estimate of a loss of 86 cents.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Affirm currently carries a Zacks Rank #3.
You can see the complete list of today’s Zacks #1 Rank stocks here.
How Other Stocks Performed
Here are some companies from the Business Services space that have already reported earnings for the June quarter: Mastercard Incorporated MA, Visa Inc. V and The Western Union Company WU.
Mastercard reported second-quarter 2023 adjusted earnings of $2.89 per share, beating the Zacks Consensus Estimate by 1.8%. The quarterly results gained from strong consumer spending, specifically across the travel sector, and an enhanced services suite. Robust growth in cross-border volume also contributed to the upside. However, the performance was partly offset by an escalating operating cost level.
Visa reported third-quarter fiscal 2023 earnings of $2.16 per share, which outpaced the Zacks Consensus Estimate by 2.4%. Its solid quarterly results benefited from higher payments, cross-border volumes and processed transactions. Steady cross-border travel growth and higher-than-expected data processing aided the results, partially offset by increased costs.
Western Union reported second-quarter 2023 earnings per share of 51 cents, which beat the Zacks Consensus Estimate by 34.2%. WU’s earnings were supported by growth in business originating from Iraq, inflation in Argentina and better-than-expected C2C transactions. Evolve 2025’s momentum and strength in the Middle East business further benefited the results, partially offset by higher expenses.
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Mastercard Incorporated (MA) : Free Stock Analysis Report
Visa Inc. (V) : Free Stock Analysis Report
The Western Union Company (WU) : Free Stock Analysis Report
Affirm Holdings, Inc. (AFRM) : Free Stock Analysis Report
