Visa Inc. (V) Q4 Earnings Assessment: Tracking the Financial Services Titan's Trajectory

Financial services giant Visa Inc. (V) beat revenue and earnings forecasts in its last reported quarter, propelled by a sustained resurgence in international travel post-pandemic. The results, announced following market closure on October 24, 2023, illustrate a persistent global inclination towards “Tap to Pay” transactions in in-store locations.

Despite escalating interest rates, a measure implemented by the Fed as part of its strategy to curtail inflation, American consumer spending has shown a striking tenacity. A surge in consumer expenditure prompted substantial growth in sectors like travel and retail, benefitting credit card companies like V.

The Federal Reserve Bank of New York discloses that American credit card balances have reached an unprecedented pinnacle of $1 trillion this year. In the second quarter of 2023 alone, credit card balances experienced a rise of $45 billion, marking a 4% increase year-over-year. According to Statista, around 242 billion global purchase transactions involved V payment cards during 2022, an average of nearly 0.66 billion transactions daily.

V's growth can also be attributed to the persistent shift towards digital payments, along with an extension of the company's service offerings – factors which are believed to have significantly boosted the fiscal fourth quarter performance.

For the fiscal fourth quarter (ended September 30, 2023), V’s net revenues soared 10.6% year-over-year to $8.61 billion, propelled by the burgeoning growth in payments volume, cross-border volume, and processed transactions.

With $3.20 trillion in payment volumes, V cemented its position as the unquestionable pacesetter in the payment realm. The company registered a 9% annual surge in payment volume while processed transactions touched 55.96 billion, seeing a 10% increase for both the fourth quarter and the full fiscal year. Excluding intra-European transactions, cross-border volume swelled 18% in the fourth quarter and an impressive 25% across the fiscal year.

Credit volumes reported an 8% growth, hitting $1.6 trillion during the fiscal fourth quarter, matching the debit volumes that rose by 9%. The company operates with over 8.5 billion endpoints, 3 billion cards, 3 billion accounts and 2.5 billion digital wallets in circulation.

Throughout the year, durable consumer spending patterns persisted, supplemented by the ongoing recovery of cross-border travel spending in comparison to 2019 levels, which resulted in sturdy growth across V's new flows and value-added services sectors.

V’s non-GAAP net income for the company reached $4.82 billion, and earnings per share stood at 2.33, signaling an uptick of 17.7% and 20%, respectively.

Let’s now direct our attention to other factors that may steer the course of the company's stock performance in the future:

Robust Growth

Over the past three and five years, V’s revenue grew at 11.6% and 9.7% CAGRs, respectively. Its EBITDA for the same periods grew at CAGRs of 12.1% and 10.2%, respectively. The company’s levered FCF grew at 10.3% and 9.9% CAGRs over the past three and five years, respectively.

Growing Institutional Ownership

V’s robust financial health and fundamental solidity make it an appealing investment opportunity for institutional investors. Notably, several institutions have recently modified their V stock holdings.

Institutions hold roughly 95.2% of V shares. Of the 3,575 institutional holders, 1,577 have increased their positions in the stock. Moreover, 164 institutions have taken new positions (4,442,807 shares).

Optimistic Analyst Estimates

For the quarter ending December 2023, its revenue and EPS are expected to surge 10% and 9.3% year-over-year to $8.73 billion and $2.38, respectively. The company has surpassed consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.

Price Performance

The stock has gained over 12% year-to-date and about 23% over the past year. Moreover, V’s stock is trading above its 200-day moving average of $231.39, indicating an uptrend.

However, Wall Street analysts expect the stock to reach $279.38 in the next 12 months, indicating a potential upside of 19.1%. The price target ranges from a low of $240 to a high of $310.

Bottom Line

As a leading player in the payment processing industry, the V's services are employed every time an individual uses a V-branded credit card. This translates into millions of daily transactions – each contributing to the company's revenue.

The company has exhibited robust fiscal health and margins that make its business model highly enticing to investors. With its payment network firmly established, V can keep operational costs at bay, resulting in significant profits.

The strength and profitability of V's business elucidate its ability to increase its dividend payments consistently. Recently, V’s board of directors announced a 16% increase in its quarterly cash dividend to $0.520 per share of Class A common stock, payable to shareholders on December 1, 2023.

V pays a $1.80 per share dividend annually, which translates to a 0.78% yield on the current share price. Its four-year average dividend yield is 0.65%. The company’s dividend payouts have grown at a CAGR of 14.5% over the past three years and 16.9% over the past five years. The company boasts of a consistent record of dividend distribution for 14 consecutive years.

Moreover, in October, V’s board of directors authorized a new $25 billion multi-year class A common stock share repurchase program.

Given V’s robust profitability, optimistic analyst estimates, attractive returns to shareholders, and solid growth over the past years, it could be a wise portfolio addition now.

Blame it on the weather

George Yacik - Contributor - Fed & Interest Rates

I expect to hear shortly the refrain among financial analysts and talking heads to explain the recent spate of relatively weak U.S. economic news: It’s the weather!

Last year about this time, you remember, we were told that the unexpected 2.9% annualized drop in first quarter 2014 GDP was an aberration and all due to the harsh winter weather. And the economy did indeed rebound sharply after that, with full year 2014 GDP growth coming in at 2.5%. Hardly spectacular growth, but a lot better than the horrible first quarter would have indicated and certainly a lot better than other places outside China and India.

So maybe there was something to that weather thing, although I think it took way too much of the blame. Continue reading "Blame it on the weather"

Fed on the Brink of Dovishness?

Lior Alkalay - Contributor - Forex

After fending off one blow from the SNB and another, albeit positive, surprise from the ECB, investors’ focus will, naturally, shift to next week when the Federal Reserve’s rate decision will take place. “What will Yellen say this time?” markets want to know. Can the Fed Chairman really stay hawkish while the rest of the world is plunging into a new cycle of easing? These questions have loomed over Fed meetings for a while now, especially as Oil prices plummeted and inflation expectations lowered. Yet to the surprise of many Fed watchers and investors, Janet Yellen, “the dove,” continued to press forward with a hawkish tone, giving an upbeat assessment on growth and stressing the Fed’s conviction that disinflation (low Continue reading "Fed on the Brink of Dovishness?"

Is The Recent Economic Slowdown Temporary?

Federal Reserve Chair Janet Yellen noted Thursday that some recent economic data have pointed to weaker-than-expected gains in consumer spending and job growth. She said the Fed will be watching to see whether the slowdown proves only a temporary blip caused by severe winter weather.

Yellen told the Senate Banking Committee that the Fed will be alert to upcoming data to make sure that the economy keeps strengthening.

"We have seen quite a bit of soft data over the last month or six weeks," Yellen said. "We need to get a firmer handle about how much of the softer data can be explained by the weather."

Responding to a question, Yellen repeated the Fed's assurances that its pullback in stimulus for the economy is "not on a preset course" and could be modified if there was a "significant change" in the Fed's outlook. The Fed is gradually reducing its monthly bond purchases, which have been intended to keep long-term loan rates low to encourage spending and growth. Continue reading "Is The Recent Economic Slowdown Temporary?"