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Visa (V) to Report Q2 Earnings: What's in the Cards?

Zacks Equity Research

Visa Inc.’s V second-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.

The Zacks Consensus Estimate for earnings in the to-be-reported quarter is $1.24 per share on revenues of $5.44 billion, which translates into year-over-year growth of 11.71% and 7.33%, respectively.

Factors Affecting Q2 Earnings

We expect to see an increase in all the revenue drivers such as service, data processing and international transaction revenues among others. The company’s overall business volumes should have risen as a result of its efforts to strengthen client relationships and expand into new partnerships. Its performance must have been fueled by partnership with traditional financial institutions, FinTechs, commercial players, new payment flow partnerships or sponsorship partners.

However, a variety of factors such as exchange rate shift, client incentive growth and currency volatility trends will partially affect revenue growth. Per the Zacks Consensus Estimate, revenues from both services and data processing are pegged at $2.45 billion each, translating into year over year growth of 8.9% and 15%, respectively. The same from international transaction is $1.89 billion, up 8.2%.

Total payments volume will see an increase from the addition of new merchant locations and new agreements along with the recent inclusion of real time disbursement of push payments. Per the Zacks Consensus Estimate, total payments volume is $2.15 trillion, up 7.9% year over year.

We expect to see an increase in client incentives in the fiscal second quarter as some of the contract signings were pushed from first fiscal quarter to second fiscal quarter.

We also expect an increase in operating expenses led by higher personnel and marketing costs.

Visa is making significant investments in 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.

The bottom line should however gain from shares bought back by the company in the fiscal second 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 6.5%. 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 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Earnings ESP: Visa has an Earning ESP of -0.16%. 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 but an Earnings ESP of -0.16% 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.

Global Payments, Inc. GPN has an Earnings ESP of +0.15% and carries a Zacks Rank #3.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Total System Services, Inc. TSS has an Earnings ESP of +1.44% and a Zacks Rank #3.

Diebold Nixdorf Inc. DBD has an Earnings ESP of +5.71% and a Zacks Rank #2.

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