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Will Visa Exceed Its Earnings Estimates Again?

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Visa

Visa (V) is scheduled to report its second-quarter earnings on April 24. In the quarter ending December 31, Visa reported 7% sequential and 20% YoY (year-over-year) growth in its EPS. The strong earnings growth was supported by growth in its payments and transaction volumes.

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Visa’s total payment volumes grew 7% YoY in the December quarter. In constant-dollar terms, which excludes the impact of foreign currency fluctuations, the growth in total payments was 11%. The total transactions grew 11% YoY.

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Expected EPS

Analysts expect Visa to generate an EPS of $1.24 for the March quarter. The expectation implies YoY growth of 11.7% and a sequential fall of 4.6%. As the above graph shows, Visa exceeded its EPS estimates in all of the last eight quarters.

Will Visa exceed the EPS expectations again?

In Visa’s earnings call for the December 2018 quarter, the company outlined the strengthening dollar as one of the factors that could impact its earnings in the second quarter of 2019. The US Dollar Index averaged 96.39 in the three months ending on March 31—compared to an average of 96.48 in the previous quarter. So, the exchange rates probably didn’t impact the company’s earnings for the quarter.

Since there hasn’t been another government shutdown, the consumer sentiment hasn’t impacted negatively. From the latest available data, consumer spending, retail sales, and other indicators look broadly favorable for card companies including Visa, MasterCard (MA), and American Express (AXP).

Some of Visa’s client incentives were shifted to the second quarter due to deal timings. Client incentives are a contra-revenue item. Client incentives are expected to have a negative impact on Visa’s second-quarter revenues, which might contribute to the expected sequential decline in Visa’s earnings.

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