Why Is Visa (V) Down 5.8% Since Last Earnings Report?
Visa (V) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.
A month has gone by 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 drivers.
Visa Q3 Earnings Beat Estimates, Revenues Improve Y/Y
Visa’s earnings of $1.49 per share, outpaced the Zacks Consensus Estimate by 12%. The bottom line improved 41% year over year.
The company’s net revenues advanced 27% year over year to $6.1 billion in the quarter under review. The top line beat the consensus mark by 5.1%.
The quarterly 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 on a constant-dollar basis climbed 34% year over year in the third quarter. Reflecting transactions processed by Visa, the company’s processed transactions grew 39% year over year to 42.6 billion courtesy of domestic transactions.
On a constant-dollar basis, the company’s total cross-border volume improved 47% year over year in the quarter. Its cross-border volume, excluding transactions within Europe, usually bolsters the company’s international transaction revenues. The metric surged 53% year over year on a constant-dollar basis.
Service revenues advanced 17% year over year to $2.8 billion driven by improved payments volume of the prior quarter. While data processing revenues climbed 32% from the prior-year quarter to $3.3 billion, international transaction revenues of $1.7 billion soared 54% year over year. Other revenues grew 31% year over year to $409 million.
Client incentives increased 41% year over year to $2.1 billion in the quarter under review.
Operating expenses of $2.1 billion escalated 12% year over year due to rise in marketing, personnel, network and processing, and depreciation and amortization expenses coupled with higher professional fees.
Interest expense declined 7.7% year over year to $131 million in the quarter.
Balance Sheet (as of Jun 30, 2021)
Visa exited the quarter with cash and cash equivalents of $18 billion, which increased 10.7% from fiscal year end Sep 30, 2020.
Total assets were $82.7 billion, up 2.2% from fiscal year end Sep 30, 2020.
Long-term debt decreased 0.4% from fiscal year end Sep 30, 2020 to $21 billion.
For nine months ended Jun 30, 2021, net cash provided by operating activities improved 34.9% from the year-ago comparable period to $11.3 billion.
Share Buyback and Dividend Update
In the quarter under review, the company bought back shares worth $2.2 billion.
On Jul 23, 2021, the company’s board of directors approved a quarterly cash dividend of 32 cents per share. The dividend will be paid on Sep 1, 2021 to its shareholders of record as of Aug 13.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
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.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. 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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