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Visa (V) to Post Q3 Earnings: What's in Store for the Stock?

Visa Inc. V is scheduled to reported third-quarter fiscal 2019 results on Jul 23, 2019. In the to-be-reported quarter, the Zacks Consensus Estimate for total revenues is pegged at $5.69 billion, up 8.68% from the year-ago reported quarter. The consensus mark for earnings per share stands at $1.33, indicating a rise of 10.83% from the prior-year reported number.

Revenues at Visa have risen consistently over the past several years, witnessing a 10-year CAGR of 12.5%. Revenue growth trend continued in the first half of fiscal 2019 with the same being up 10.5% year over year. We believe, the company should retain its revenue momentum in the coming quarters on the back of its strong market position and attractive core business that are steadily driven by new deals, renewed agreements, accretive acquisitions, increasing spending via cards, shift to digital form of payments and expansion of service offerings.

Revenues should see an upside from higher payments volumes, cross-border volumes and processed transactions.

Service Revenues (34% of total revenues) constituting the support services provided to clients for usage of the company’s products are aided by payments volumes. The Zacks Consensus Estimate for revenues from this business line suggests an 8.1% increase to $2.37 billion from the year-earlier reported figure on the back of total payments volumes growth of 8% (at constant currency) recorded in the previous quarter.

Data Processing Revenues (35%) depend on a number of transactions processed. Visa generates this revenue  by authorizing, clearing, settling, providing network access and other services for the transactions processed. The Zacks Consensus Estimate for revenues from this business line is pinned at $2.7 billion, up 13.3% from the year-ago reported number on 11% improvement in processed transactions to 45.6 billion.

International Transaction Revenues (28%), boosted by cross-border transactions, are expected to climb 8% year over year to $1.98 billion, led by higher transactions in Europe, Asia Pacific, Canada, CEMEA and LAC.

However, Visa’s revenues will be to some extent offset by a spurt in client incentives, which the company rewards financial institutions and merchants with to increase acceptance of its products and perk up higher payments volumes on its network. This is a contra revenue item and has been on the rise for the last several quarters.

We also expect escalated operating expenses, induced by higher personnel and marketing costs.

Visa is making significant investments in its business initiatives and strategic priorities, which include investments in its employees and digital products, technological operations plus merchant solutions to position itself for long-term sustainable growth. This may be reflected in elevated expense levels in the to-be-reported quarter, which might drag margins to some extent.

However, the bottom line should gain from the company’s share buyback in the fiscal third quarter.

Earnings Surprise History

The company boasts an attractive positive earnings surprise history, having surpassed estimates in each of the trailing four quarters, the average being 5.4%. This is depicted in the chart below:

Visa Inc. Price and EPS Surprise

Here is what our quantitative model predicts:

Our proven model does not conclusively show that Visa is likely to beat on earnings this quarter to be reported. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1, 2 or 3 for this to happen. But that is not the case here as you will see below.

Earnings ESP: Visa has an Earning ESP of -0.55%. You can uncover the best stocks to buy or sell before they’re reported with our">Earnings ESP Filter.

Zacks Rank: Visa carries a Zacks Rank #2 (Buy) but its negative ESP leaves surprise prediction inconclusive.

Stocks That Warrant a Look

Here are a few finance stocks that you may want to consider as our model shows that these have the right combination of elements to beat on earnings in the upcoming releases.

Discover Financial Services DFS has an Earnings ESP of +1.00% and a Zacks Rank #3 (Hold).

PayPal Holdings, Inc. PYPL has an Earnings ESP of +14.38% and a Zacks Rank of 3.

Square, Inc. SQ has an Earnings ESP of +5.31% and a Zacks Rank of 2. 

You can see _1link">the complete list of today’s Zacks #1 Rank stocks here.

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