Earnings Results: Visa earnings show why company is diversifying beyond credit cards

Visa Inc.’s latest earnings can help illustrate why the company has been on a recent acquisitive spree.

The company posted $1.46 a share in earnings Thursday for its fiscal first quarter, in line with the FactSet consensus. Revenue of $6.05 billion was a hair shy of the FactSet consensus projection for $6.08 billion. Visa stock V, +1.64%   dipped 3% in aftermarket trading.

“Lower client incentives were more than offset by lower card-service revenues,” wrote Barclays analyst Ramsey El-Assal, who called the results “soft around the edges.”

It was an “unusually weak quarter” in the eyes of Wedbush analyst Moshe Katri, who pointed to some of management’s commentary about regional challenges. In Australia, the wildfires had a negative impact on business, while the U.K. was “very weak” as volumes slowed around the December election.

The company disclosed that payment volume grew by 8%, or 10% excluding China and the U.K. Management said China volumes are mainly related to dual-branded cards that don’t have much revenue impact.

“Both Visa and Mastercard have been aggressively focusing on expanding their value-added services businesses via acquisitions with the objective of diversifying the existing revenue base while reducing dependence on the traditional transaction processing fees in order to avoid some of the same challenges impacting Visa’s current quarter,” Katri told MarketWatch in an email.

One of those acquisitions is Visa’s pending $5.3 billion deal for Plaid, a company whose software enables users to connect their bank accounts with new fintech platforms like PayPal Holdings Inc.’s PYPL, +0.39%  Venmo.

Don’t miss: Visa makes another move beyond credit cards with $5.3 billion deal for Plaid

Visa called out other areas not related to card-swiping volume, including cross-border business-to-business payments, where the company has made “significant progress,” according to Chief Executive Al Kelly. He highlighted deals with TransferWise and MoneyGram.

On the whole, the company saw over 700 million transactions that made use of its Visa Direct push-payment capabilities for various payment-use cases, such as business disbursement and peer-to-peer money transfers.

Read: MTA expands tap payments to Penn Station after seeing 4 million taps since rollout began

The results follow numbers from Mastercard Inc. MA, +1.29%  a day earlier that analysts said were indicative of healthy consumer-spending trends. While Mastercard’s executives said they were monitoring the impact of the coronavirus on spending, much of the company’s China-related volume occurs online, a channel that may not be affected as much by store closures and lockdowns in China.

See more: Mastercard says it has a ‘natural hedge’ on coronavirus as much of its China-related volume is online

Visa Chief Financial Officer Vasant Prabhu said it was “too early” to gauge the impact from the virus but let on that the outbreak, along with the timing of Lunar New Year, may have impacted cross-border volumes toward the end of January.

Visa shares have climbed 16% over the past three months, as the Dow Jones Industrial Average DJIA, +0.43%  , of which it is a component, has added 6%.

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