It has been about a month since the last earnings report for Visa (V). Shares have added about 8.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Visa due for a pullback? 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 Beats Q4 Earnings on Strong Payments Volume, Hikes Dividend
Visa reported fourth-quarter fiscal 2024 earnings of $2.71 per share, which outpaced the Zacks Consensus Estimate of $2.58 by 5%. The bottom line increased 16% year over year.
Net revenues of $9.6 billion improved 12% year over year. The top line beat the consensus mark by 1.2%.
The quarterly results were driven by increased payments volume, processed transactions and cross-border volumes, benefiting from expanding global operations and solid demand for digital payments. However, the upside was partly offset by increased operating expenses, primarily marketing and personnel costs.
Q4 Business Drivers of Visa
Visa's payments volume increased 8% year over year on a constant-dollar basis in the fiscal fourth quarter on the back of expanding operations across Canada, Europe, CEMEA and LAC regions. Processed transactions (implying transactions processed by Visa) grew 10% year over year to 61.5 billion. The metric fell short of the Zacks Consensus Estimate of 61.9 billion but outpaced our estimate of 61.4 billion.
On a constant-dollar basis, the cross-border volume of Visa rose 13% year over year. Excluding transactions within Europe, its cross-border volume (that boosts a company’s international transaction revenues) also rose 13% year over year on a constant-dollar basis.
Visa’s Q4 Operational Performance
Service revenues (depending on payments volume in the previous quarter) advanced 8% year over year to $4.2 billion in the September quarter, attributable to expanding payment volumes. The metric beat the consensus mark of $4.14 billion but lagged our estimate of $4.21 billion.
Data processing revenues of $4.61 billion grew 8% year over year. The metric fell short of the Zacks Consensus Estimate of $4.72 billion and our estimate of $4.67 billion.
International transaction revenues advanced 9% year over year to $3.47 billion in the fiscal fourth quarter on the back of higher cross-border volume. The metric lagged the consensus mark of $3.5 billion but beat our estimate of $3.46 billion. Other revenues were $969 million, which climbed 30% year over year and surpassed our estimate of $915.2 million.
Client incentives (a contra-revenue item) increased 6% year over year to $3.6 billion but were lower than the Zacks Consensus Estimate of $3.7 billion. The metric accounted for 27.4% of the company’s gross revenues of $13.2 billion.
Adjusted operating expenses of $3.19 billion escalated 11% year over year due to higher marketing and personnel costs. The metric was higher than our estimate of $3.12 billion. However, interest expenses fell 3.8% year over year to $176 million.
Visa’s Balance Sheet (as of Sept. 30, 2024)
Visa exited the September quarter with cash and cash equivalents of nearly $12 billion, which declined 26.5% from the fiscal 2023-end level.
Total assets of $94.5 billion increased 4.4% from the fiscal 2023 year-end level.
Visa’s long-term debt amounted to $20.8 billion, up 1.8% from the figure as of Sept. 30, 2023.
Total equity inched up 1% from the fiscal 2023 year-end figure to $39.1 billion.
V’s Cash Flows
The company generated net cash from operations of $6.7 billion in the fiscal fourth quarter, which slipped 3.8% year over year. Free cash flows were recorded at $6.4 billion, down 4% year over year.
Visa’s Capital Deployment Update
Visa rewarded $6.8 billion to shareholders via share buybacks ($5.8 billion) and dividends ($1 billion) in the September quarter. V had leftover authorized funds of $13.1 billion under its repurchase program as of Sept. 30, 2024.
On Oct. 29, 2024, Visa’s board of directors announced a raise in the quarterly cash dividend for Class A common stock. The increased dividend amounting to 59 cents per share will be paid out on Dec. 2, 2024, to shareholders of record as on Nov. 12.
V’s Fiscal 2024 Update
In fiscal 2024, Visa achieved net revenues of $35.9 billion, marking a 10% year-over-year increase. Adjusted earnings per share (EPS) increased 15% year over year to $10.05.
Visa’s payments volume rose 8% year over year on a constant-dollar basis. Processed transactions totaled 233.8 billion, representing a 10% year-over-year increase. Cross-border volume expanded 15% on a constant-dollar basis in fiscal 2024.
Visa’s Fiscal 1Q25 Outlook
On an adjusted constant-dollar basis, net revenues are anticipated to witness high single-digit growth. Operating expenses are estimated to grow high single digit to low double digits on an adjusted constant-dollar basis. It expects EPS to witness low double-digit growth.
Visa’s Fiscal 2025 View
Management estimates net revenues to witness high-single-digit to low-double-digit growth on an adjusted constant-dollar basis in fiscal 2025. Operating expense is also expected to witness high single-digit to low double-digit growth on an adjusted constant-dollar basis. It anticipates EPS to witness growth in the high end of low double digits.
Amortization of acquired intangible assets is projected at around $180 million or 8 cents per share. Acquisition-related costs are expected at roughly $90 million or 4 cents per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
At this time, Visa has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
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.
Performance of an Industry Player
Visa belongs to the Zacks Financial Transaction Services industry. Another stock from the same industry, Wex (WEX), has gained 9.2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.
Wex reported revenues of $665.5 million in the last reported quarter, representing a year-over-year change of +2.2%. EPS of $4.35 for the same period compares with $4.05 a year ago.
For the current quarter, Wex is expected to post earnings of $3.56 per share, indicating a change of -6.8% from the year-ago quarter. The Zacks Consensus Estimate has changed -3.4% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Wex. Also, the stock has a VGM Score of F.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
