Visa, Inc. V is set to report first-quarter fiscal 2021 earnings on Jan 28, after the market closes.
In the last reported quarter, the company’s earnings of $1.12 per share beat the Zacks Consensus Estimate by 2.75%. However, the bottom line declined 23.8% year over year. Results showed gains from payment volumes and processed transactions but a contraction in cross-border volumes was a spoiler.
Let’s see how things have been shaping the company’s earnings before its announcement.
The company’s key revenue drivers, such as payments volume, processed transactions and cross-border volumes are expected to have improved in the to-be-reported quarter on the back of gradual recovery in consumer spending.
Aided by the accelerated shift to e-commerce and digital payments in face-to-face transactions, the domestic business experienced a V-shaped rebound. Processed transactions largely track domestic payments volume growth and therefore the metric is likely to show an uptick in the upcoming quarterly release. The Zacks Consensus Estimate for total payment transactions is pegged at $51.7 billion, implying a 4.8% increase from the year-ago quarter’s reported figure.
The significant rise in online shopping is likely to have bumped up card-not-present (CNP) transactions, which occur in absence of both the cardholder and the credit card, in the to-be reported quarter.
Visa’s debit business is a consistent key beneficiary of the rapid shift to e-commerce and the transition from cash even for in-person transactions.
In the United States, transactions made by debit cards are growing twice the rate of the level in pre-COVID times. These uptrends might have continued in the to-be-reported quarter as well.
The company is likely to have seen substantial buoyancy in the number of people activating their cards online and making more transactions through its usage during the period under review.
On the flip side, borders remain largely closed or cross-border travel faces an embargo due to quarantines or other bans, which in turn, slowed down the retrieval on the same front. Also, cross-border business comes with higher yields. Thus, this significant shift in mix dragged revenue growth, which is most likely to continue even in fiscal 2021 until the cross-border commerce improves. Therefore, the final quarter of 2020 might have endured weakness in cross-border transactions. Per the Zacks Consensus Estimate international transaction revenues are pegged at $1.36 billion down 32.8% from the year ago reported figure.
However, total operating expenses are likely to have declined, primarily on lower marketing, and general and administrative expenses.
Client incentives, a contra revenue item, are likely to have shot up in the to-be-reported quarter as the same is tied more to domestic than cross-border volumes. The current shift in mix from cross-border operations hurts gross revenues and would have caused an increase in client incentives. Also, client renewals are likely to have pushed up client incentives.
Earnings & Revenue Expectations
The Zacks Consensus Estimate for Visa’s first-quarter fiscal 2021 earnings of $1.27 per share implies a 13.01% deterioration from the prior-year period’s reported number. Likewise, the consensus estimate for sales of $5.52 billion suggests an 8.81% drop from the year-ago quarter’s reported figure.
Earnings Surprise History
The company boasts a pleasant earnings surprise record. Its bottom line surpassed estimates in each of the last three (met the mark in one) quarters, the average beat being 2.41%. This is depicted in the chart below:
Visa Inc. price and EPS Surprise
Visa Inc. price-eps-surprise | Visa Inc. Quote
Our proven model does not predict a beat for Visa this earnings season. The combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — increases the odds of a positive earnings surprise. But that is not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Visa has an Earnings ESP of -0.11%.
Zacks Rank: Visa currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks That Warrant a Look
Some stocks worth considering with the right combination of elements to beat on earnings this time around are:
AXOS FINANCIAL Inc. AX has an Earnings ESP of +4.94% and is presently Zacks #3 Ranked.
Houlihan Lokey, Inc. HLI currently has a Zacks Rank #2 and an Earnings ESP of +5.40%.
Moody’s Corporation MCO has an Earnings ESP of +3.78% and is a #3 Ranked player, presently.
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