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It has been about a month since the last earnings report for Visa (V). Shares have lost about 5.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Visa due for a breakout? 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 catalysts.
Visa Q4 Earnings and Revenues Top Estimates, Rise Y/Y
Visa reported fourth-quarter fiscal 2021 earnings of $1.62 per share, which outpaced the Zacks Consensus Estimate by 5.88%. The bottom line improved 45% year over year.
Net revenues rose 29% year over year to $6.6 billion in the quarter under review. The top line beat the consensus mark by 1.2%.
Results were aided by solid growth in payments volume, processed transactions and cross-border volume, partly offset by elevated operating costs.
Payments volume of Visa climbed 17% year over year in the third quarter. The company’s processed transactions grew 21% year over year to 45.3 billion, courtesy of domestic transactions.
Total cross-border volume improved 38% year over year in the quarter. Its cross-border volume excluding transactions within Europe usually bolsters the company’s international transaction revenues.
Service revenues surged 41% year over year to $3.1 billion, driven by an improved payments volume recorded in the prior quarter. While data processing revenues climbed 20% from the prior-year quarter to $3.4 billion, international transaction revenues of $1.79 billion soared 41% year over year. Other revenues grew 36% year over year to $490 million.
Client incentives increased 40% year over year to $2.4 billion in the quarter under review.
Operating expenses of $2.2 billion escalated 15% year over year due to rise in marketing, personnel and professional fees.
Interest expense declined 13.8% year over year to $125 million in the quarter.
Balance Sheet (as of Sep 30, 2021)
Visa exited the quarter with cash and cash equivalents of $16.5 billion, which increased 1.2% from the level at the fiscal-year end on Sep 30, 2020.
Total assets were $82.9 billion, up 2.4% from the fiscal-year end level as of Sep 30, 2020.
Long-term debt decreased 5.2% to $20 billion from the fiscal-year end reading on Sep 30, 2020.
Share Buyback and Dividend Update
In the quarter under review, the company bought back shares worth $3.1 billion.
The board of directors increased Visa's quarterly cash dividend by 17% to 37.5 cents per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Visa has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
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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