Here's What to Expect From Visa's (V) Fiscal Q1 Earnings
Visa Inc.’s V first-quarter fiscal 2019 results will likely be driven by growth in payments volume, cross-border volume and processed transactions, and a lower tax rate. Exchange rate shifts, due to a strong dollar, are expected to drain revenues and earnings to some extent. Management expects currency translation impact to be a 100-basis-point headwind in fiscal year 2019.
The Zacks Consensus Estimate for earnings is $1.25 per share on revenues of $5.40 billion, which translate into year-over-year growth of 15.7% and 11.1%, respectively.
Factors Affecting Q1 Earnings
Total payments volume will see an increase from the addition of new merchant locations and new agreements with clients. In 2018, merchant locations increased by 7 million or 15%, reaching a total of 54 million locations globally. Also, U.S. payments volume will grow on the back of Visa Direct (Visa Direct is a VisaNet processing capability that allows safe, convenient, real-time funds delivery directly to financial accounts using card credentials) and robust consumer spending across most retail categories. The Zacks Consensus Estimate for payments volume is $2.2 trillion, up 8.1% year over year.
We expect to see an increase in all the components of net revenues such as service, data processing and international transaction revenues among others. Visa must have ramped up efforts to get banks and retailers to direct more spending its way. This must have led to an increase in client incentives, which is a contra revenue item and will likely act as a partial dampener to revenue growth.
The company's strong international business will likely push up cross border volume growth, partially offset by dollar strength -- particularly inbound commerce to the United States.
Processed transaction growth should remain stable and healthy in the fiscal first quarter. Data processing revenue should gain from pricing actions taken in fiscal year 2018. The Zacks Consensus Estimate for revenues from data processing is $2.49 billion, up 15.8% year over year.
Visa is making significant investments in its business initiatives and strategic priorities, which include investments in its people and digital products, technological operations, and merchant solutions to position itself for long-term sustainable growth. This may be reflected in higher expense levels in the to-be-reported quarter. Also, the adoption of the new accounting standard, will lead to additional expenses. Management expects adjusted expense growth in double digits and marketing expenses to be higher in the fiscal first quarter.
The bottom line should however gain from shares bought back by the company in the fiscal first quarter.
Earnings Surprise History
The company boasts an attractive earnings surprise history, having surpassed estimates in each of the trailing four quarters, with an average positive surprise of 8.4%. This is depicted in the chart below:
Visa Inc. Price and EPS Surprise
Visa Inc. Price and EPS Surprise | Visa Inc. Quote
Here is what our quantitative model predicts:
Our proven model does not conclusively show that Visa is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1, 2 or 3 for this to happen. But that is not the case here as you will see below.
Earnings ESP: Visa has an Earning ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Visa carries a Zacks Rank #3 (Hold) but an Earnings ESP of 0.00% leaves our surprise prediction inconclusive.
Stocks That Warrant a Look
Here are a few finance stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming release.
Mastercard Inc. MA has an Earnings ESP of +1.45% and carries a Zacks Rank #3. The company is expected to report fourth-quarter results on Jan 31.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
First Data Corp. FDC has an Earnings ESP of +4.35% and a Zacks Rank #3. The company is expected to report fourth-quarter earnings on Jan 30.
TCF Financial Corp. TCF has an Earnings ESP of +1.50% and a Zacks Rank #3. The company is expected to report fourth-quarter earnings on Jan 30.
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