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Visa's (V) Earnings and Revenues Surpass Estimates in Q2

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Visa Inc. V reported second-quarter fiscal 2021 earnings of $1.38 per share, which beat the Zacks Consensus Estimate by 9.52%. However, the bottom line was down by a penny.

Meanwhile, the company’s net operating revenues of $5.73 billion outpaced the Zacks Consensus Estimate by 3.12%. However, the top line fell 2.1% year over year due to the year-over-year decline in cross-border volume, mostly offset by growth in payments volume and processed transactions.

Visa Inc. Price, Consensus and EPS Surprise

Visa Inc. Price, Consensus and EPS Surprise
Visa Inc. Price, Consensus and EPS Surprise

Visa Inc. price-consensus-eps-surprise-chart | Visa Inc. Quote

Financial Performance

On a constant-dollar basis,(a constant dollar is an adjusted value of currency used to compare dollar values from one period to another) payments volume in the quarter was up 11% year over year. Also, processed transactions improved 8% from the prior-year quarter to 37.6 billion, driven by growth in domestic transactions.

Total cross-border volume of Visa on a constant-dollar basis fell 11% year over year during the quarter. The company’s cross-border volumes excluding transactions within Europe (which drive its international transaction revenues) slumped 21% year over year on a constant-dollar basis.

Service revenues were up 8% year over year to $2.8 billion, attributable to higher payments volume of the first quarter. On a year-over-year basis, data processing revenues were up 11% to $3 billion while international transaction revenues plunged 19% from the prior-year quarter to $1.5 billion.

Other revenues stayed flat year over year at $392 million, negatively impacted by the low usage of travel-related card benefits and client-marketing projects, which were postponed to the latter half of this year, partly offset by growth in advisory services.

Client incentives (amount that Visa pay to its clients to route transactions over its network) of $2 billion grew 17% year over year.

Operating expenses increased 3% year over year to $1.98 billion, primarily due to an increase in personnel expenses, partially offset by decreases in general and administrative, and marketing and professional fees.

Balance Sheet (as of Mar 31, 2021)

Cash and cash equivalents were $16.5 billion, up 1.3% from the level at the fiscal year-end on Sep 30, 2020.

Total assets were $80.2 billion, which declined 0.9% from the level as of the fiscal year-end on Sep 30, 2020.

Long-term debt slid nearly 0.5% to $21 billion from the fiscal year-end level as of Sep 30, 2020.

Share Buyback and Dividend Update

During the quarter under review, the company made share repurchases worth $1.7 billion.

On Apr 23, 2021, the company declared a quarterly cash dividend of 32 cents per share. The dividend will be paid out on Jun 1, 2021 to its shareholders of record as of May 14.

Our Take

Visa is uniquely poised to gain from the shift in payments to the digital mode. Numerous acquisitions and alliances made over the years have paved the way for long-term growth and consistently drove revenues. Technological upgrades bode well for Visa. The coronavirus vaccine development and the gradual revival of consumer confidence will drive spending, expanding the company's business volumes in turn. The weakness in cross-border spending is only temporary and should catch up soon as vaccines get distributed globally. Its strong balance sheet is another positive, which enables investment in business.

Zacks Rank & Performance of Other Players

Visa currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some other companies in the same space that already released first-quarter results are American Express Company AXP, Synchrony Financial SYF and Discover Financial Services DFS, which beat on earnings by 3.57%, 15.3% and 75%, respectively.

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American Express Company (AXP) : Free Stock Analysis Report

Visa Inc. (V) : Free Stock Analysis Report

Discover Financial Services (DFS) : Free Stock Analysis Report

Synchrony Financial (SYF) : Free Stock Analysis Report

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