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Visa (V) Q4 Earnings and Revenues Beat Estimates, Up Y/Y

Zacks Equity Research

Visa Inc. V reported fourth-quarter and fiscal 2019 earnings of $1.47 per share, beating the Zacks Consensus Estimate by 2.8%. The bottom line improved 21% year over year.

The results were driven by growth in payments volume, cross-border volume and processed transactions.

Net operating revenues of $6.1 billion beat the Zacks Consensus Estimate by 1% and were up 13% year over year. This upside was primarily driven by an increase in all the components of net revenues such as service, data processing, international transaction revenues and others.

However, increase in client incentives, which constitute a contra revenue item, acted as a partial dampener to revenue growth.

Visa Inc. Price, Consensus and EPS Surprise

Visa Inc. Price, Consensus and EPS Surprise

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

Strong Financial Performance

On a constant-dollar basis, payments volume growth in the quarter was 9% year over year. Cross-border volume growth, on a constant-dollar basis, was 7%. Visa's processed transactions increased 12% from the prior-year quarter to 35.4 billion.

Service revenues increased 9% year over year to $2.5 billion on higher nominal payments volume. Notably, other revenue components are based on the reported quarter’s activity. On a year-over-year basis, data processing revenues rose 16% to $2.8 billion and international transaction revenues grew 11% to $2.2 billion. Other revenues increased 35% year over year to $345 million.

Client incentives of $1.7 billion increased 17% year over year.

Adjusted operating expenses increased 11% year over year to $2 billion, primarily due to marketing, and general and administrative costs. Interest expense declined 20% year over year to $120 million.

Full-Year Result

Net revenues of $23 billion increased 11% year over year, and earnings of $5.44 per share were up 18%.

Solid Balance Sheet

Cash and cash equivalents, and available-for-sale investment securities were $7.8 billion as of Sep 30, 2019, down 4% year over year.

Total assets were $72.6 billion as of Sep 30, 2019, up 5% year over year.

Developments During the Quarter

Visa expanded its partnership with fintech company Revolut. This London based company will be assisted by Visa to expand its business globally.

Per the terms of the deal, Revolut will primarily issue Visa-branded cards in Australia, the United States, Canada, Japan and other markets. The expansion of Visa’s partnership with Revolut is in sync with its long-term strategy of collaborating with fintech players to keep up with the rapidly changing technology and innovations.

Visa completed the acquisition of Verifi, a provider of payment protection and management solutions. With Verifi, the company intends to reduce chargeback and give buyers and sellers intelligent, data-driven tools that foster collaboration, build trust, and improve the overall customer experience.

Visa expanded its Visa B2B Connect network from 30 when it launched in June 2019 to 62. The company further plans to expand to over 100 countries in 2020.

2020 Guidance

For fiscal 2020, Visa expects annual net revenues to grow in low double digits on a nominal basis, with approximately 1% to 1.5%% of negative foreign currency impact and  nearly 0.5% of positive impact from acquisitions. Client incentives, as a percentage of gross revenues, are projected in the range of 22.5% to 23.5% (earlier 21.5-22%). Annual adjusted operating expense is expected to increase by  mid-to high-single digit) and the effective tax rate is estimated between 19% and 19.5%.

The company expects annual earnings per share growth in mid-teens.

Our Take

Visa remains well positioned for future growth on the back of its solid market position, increase in payments volume, accretive acquisitions and significant opportunities owing to its secular shift toward electronic payments. Its strong balance sheet position and vast payment network offer significant long-term growth potential.

Zacks Rank & Other Stocks to Consider

Visa currently carries a Zacks Rank #2 (Buy).

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

Some other stocks worth considering in the same space are Green Dot Corporation GDOT, FleetCor Technologies, Inc.FLT and Diebold Nixdorf, Incorporated DBD. While Green Dot sports a Zacks Rank #1, FleetCor and Diebold Nixdorf carry a Zacks Rank of 2.

Green Dot, FleetCor and Diebold Nixdorf beat their estimates in the last reported quarter by 42.86%, 2.2% and 140%, respectively.

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