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Visa Expected to Post Growth in Fiscal 4Q16 on Integration, Spending

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Performance amid uncertainty

Visa (V) is expected to post EPS (earnings per share) of $0.73 for fiscal 4Q16[1. quarter ending September 30, 2016] compared to $0.62 in fiscal 4Q15. For the fiscal year, analysts expect EPS of $2.79 with an implied price-to-earnings multiple of 29x.

The stable wages, declining unemployment, and growth in the Eurozone is expected to lead to higher spending. Visa Europe’s acquisition should enable the company to target growth in the Eurozone’s major countries.

EstvsAct

Visa (V) posted adjusted net earnings of $1.6 billion, or $0.69 per unit, for fiscal 3Q16.[2. quarter ended June 30, 2016] This is compared to $0.67 per unit in fiscal 2Q16 and $0.74 per unit in fiscal 3Q15.

The steady conversion from cash and check to card-based payments and the higher penetration of online purchase transactions shifting toward mobile payment, which needs to occur electronically, should provide an attractive growth platform to digital payment network players.

Visa’s net operating revenue stood at $3.6 billion, an increase of 3% on a year-over-year basis. The company’s adjusted operating margin remained consistent at 68%.

Visa also announced an extension of its buyback program authorization by $5.0 billion to $7.3 billion, which is intended to offset dilution from the preferred stock issuance. To fund this initiative, the company used $7.3 billion in funds that were authorized by the board of directors.

Resilient performance

Visa’s CEO, Charlie Scharf, stated in the company’s July 21, 2016, press release, “We continue to be pleased with our performance as we delivered consistent and predictable results. While little has changed in the global economic environment, and cross-border commerce continues to be challenged by a strong U.S. dollar, domestic consumers spend across the globe remains strong and resilient.

“Furthermore, we are delighted to have closed our purchase of Visa Europe and remain confident that operating as a unified global business will quickly bring meaningful value to our clients and the economies in Europe.”

Here’s how some of Visa’s peers in the payment processing industry fared with their respective quarterly earnings:

  • Mastercard (MA): beat estimates
  • American Express (AXP): beat estimates
  • Fidelity National Information Services (FIS): beat estimates

Together, these companies account for 2.3% of the Technology Select Sector SPDR ETF (XLK).

Financial services

Visa (V) provides numerous payment solutions that support companies can offer to their accountholders. The company provides payment products that include credit, debit, and prepaid cards. Because Visa isn’t a bank, it doesn’t issue cards, extend credit, or set rates and fees for Visa product account holders.

In the following parts of this series, we’ll discuss Visa’s revenues, spending, balance sheet strength, Europe merger, dividends, and valuations.

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