North America

Earnings Preview: Visa Q2 2017 (V)

By: Craig Bowles

Overview

Visa, Inc. (V) is slated to report 2Q 2017 earnings before the bell on Thursday, April 20th. The earnings release is expected at approximately 4:05 p.m. ET with a conference call to follow at 5:00 p.m. that is webcast through Visa Investor Relations. A member of the Dow Jones Industrial Average, Visa has significant market influence and the potential to impact the broader market gauges.

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Outliers & Strategy

Key measures:

  • Adjusted Earnings Per Share (EPS): The current Street estimate is $0.79 (range $0.75 to $0.82). (Source: Yahoo! Finance) Consensus was $0.80 three months ago. (If an Adjusted or Non-GAAP EPS is not available, the GAAP EPS will be the comparable number.)
  • Revenues: Analysts expect an 18.7% y/y increase to $4.31 bln (range $4.12 bln to $4.71 bln).
  • In terms of guidance, the company sees 2017 Adjusted EPS growth in the mid-teens and revenue growth of 16% to 18%.
  • Price/Earnings of 35.0 compares to the 5-yr average of 32.4; Price/Book of 7.9 compares to the 5-yr average 5.0; Price/Revenue of 13.4 compares to the 5-yr average of 11.5. Dividend yield of 0.7% compares to the 5-yr average of 0.7%.
  • Analysts remain bullish on Visa with 27 Buy, 1 Hold, and 0 Sell ratings. (source: MarketBeat.com)
  • Insiders have sold 181,265 shares during the last three months and 1,141,138 shares in the past year. (source: NASDAQ.com) The company approved another $5 bln buyback in July 2016, so similar to what the previous three years announced in Q4.
  • Delinquency rates on credit card loans for all commercial banks got down to 2.11% (historic lows) in early 2015 and have moved up only slowly since then. (source: stlouisfed.org)
  • Visa is compared to other credit card and financial companies, with quarterly results possibly impacting MasterCard (MA), American Express (AXP), Discover Financial (DFS), Citigroup (C), and JP Morgan Chase (JPM).
  • Visa shares have a 1-day average price change on earnings of 2.43%. Options imply a 3.01% move off earnings.

Recent News

  • 04/13: Barclays reiterated an Overweight rating on Visa citing growth from new deals for shares that look historically undervalued, according to a post on Barron’s.com.
  • 03/07: Visa is seeing an overwhelming trend where governments around the world are increasingly taking an interest in driving towards cashless economies and should benefit beginning in India, according to a post on Barron’s.com.
  • 03/06 Morgan Stanley reiterated an Overweight rating on Visa, calling it a top pick of the year. Integration with Visa Europe is tracking well in-line with expectations and represents a key EPS upside opportunity over time, according to a post on Barron’s.com.
  • 02/22: Visa put out a statement on its UK site warning that the rules could “seriously disrupt online shopping and cause inconvenience for consumers.” The European Banking Authority is considering rules that could add more verification procedures when people buy items online, according to a post on Barron’s.com.

Technical Review

Visa’s stock reached another new all-time high of $92.05 recently in March and is showing relative strength by remaining above the 50-day moving average. Point and figure charts show balance area support around $79 in the event of a retest of the 200-day moving average. (Chart courtesy of StockCharts.com)

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Summary

Integration with Visa Europe appears to be going well. The analyst optimism for Visa is tied to a global push toward a cashless society which some may find a little unsettling. Card delinquencies are still low historically despite trending since early 2015. Insider selling eased after a brief spike three months ago. Visa has beaten estimates by an average of 4c the past four quarters. Estimize consensus for an Adjusted EPS of $0.82 on revenue of $4.348 bln compares to analyst consensus of $0.79 on revenue of $4.31 bln.

 

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