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What Happened
Visa posted revenue and earnings at about the same level analysts had expected. Its payments volume growth was just short of expectations, coming in at 8% as opposed to the 9% analysts had forecast. Visa’s stock fell 2% on the news in after-hours trading.
(Below is Investopedia’s original earnings preview, published 1/23/20)
What to Look for
Visa Inc. (V) has amassed an enviable record on the earnings front, beating EPS expectations in the last 13 consecutive quarters. That growth has been driven by the company’s soaring payments volume as Visa expands its “network of networks” strategy, which emphasizes acquisitions and expansion outside of Visa’s core network in an effort to provide wider coverage across financial institutions and borders. As a result, investors will be watching Visa’s key payments metric when it reports Q1 2020 results after the close of trading on January 30. In past year, Visa’s stock has posted a total return of about 51%, nearly double the S&P 500. Analysts currently estimate Visa will post a 9% rise in Q1 payments volume along with increasing revenue and earnings.
Visa has reported impressive gains in revenue in recent periods, with percentage change year-over-year growth of 12.9% for Q4 FY2019 ending September 30, 11.5% for Q3 ending June 30, and 8.3% for Q2 ending March 31. EPS of $1.34 for fiscal Q4 of 2019 marked an upside surprise and the stock reacted by rising 2.8% during the regular market session. The positive results continued the trend of rising stock prices throughout the year.
| V Key Metrics | |||
|---|---|---|---|
| Estimate for Q1 2020 (FY) | Actual for Q1 2019 (FY) | Actual for Q1 2018 (FY) | |
| Earnings Per Share | $1.46 | $1.30 | $1.07 |
| Revenue (billions) | 6.1 | 5.5 | 4.9 |
| Payments Volume Growth | 9.0% | 6.9% | 13.5% |
In the coming results, investors will be watching the key metric of payments volume growth, referencing the total value of payments taking place across Visa’s financial platform, as a gauge of performance. In Q4, the company posted a healthy payments volume growth rate of 7.3% year-over-year, which analysts estimate will speed up in Q1 of FY2020 with 9% growth.
However, while Visa’s estimated Q1 growth in payments volume is greater than any quarter in fiscal year 2019, it’s dramatically slower than most quarters in FY2017 and FY2018. In Q2 of FY2017 for example, payment volume rose 38.5%.
The company’s payments growth will be bolstered by a new element in its “network of networks” strategy: the recent acquisition of Plaid, a network that facilitates the connection between payment applications and banking accounts, takes another step forward in this objective. Continued growth in customer-focused applications and in the business-to-business space could drive Visa’s strong performance into future quarters.
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