Visa Inc. shares gained in after-hours trading Thursday after the company beat profit expectations and delivered a forecast that one analyst said showed “fundamental strength” across the business.
The payments giant finished out its fiscal year with adjusted earnings per share of $1.47 for the fourth quarter, up from $1.21 in the year-earlier period and ahead of the $1.43 that analysts surveyed by FactSet had been predicting. Revenue climbed to $6.1 billion from $5.4 billion, matching the FactSet consensus of $6.1 billion.
For the fiscal year ahead, Visa V, +2.83% expects low double-digit revenue growth and a negative-1% to negative-1.5% impact from foreign currency. It also projects a roughly 0.5% positive impact from acquisitions. On earnings, the company is calling for mid-teens growth, a 1% to 1.5% negative foreign-currency impact, and a negative acquisition impact of about 1%. The company’s outlook assumes stability in economic conditions.
The outlook served as “the real bright spot,” wrote Baird analyst David Koning. Keefe, Bruyette, and Woods analyst Sanjay Sakhrani said that he “came away from the conference call feeling like the underlying volume growth remains intact and the set up for next year (and beyond) is positive.”
Visa spent time on its earnings call walking through the various inputs for its forecast, including an expected boost in client incentives, which Visa pays to partners to route more payment volume through its platform.
The company said it will have renewed a third of its volume during the three quarters spanning from the just-completed fourth quarter of fiscal 2019 to the second quarter of fiscal 2020, which Chief Financial Officer Vasant Prabhu called “an unprecedented level of renewal activity” as the company saw some opportunities for early renewals with clients such as Chase in addition to its scheduled renewals. These renewals are driving the expected incentive growth and Visa projects that it will feel the full effects starting this quarter.
In terms of positive drivers for Visa’s financials, the company expects to continue benefiting from pricing actions taken in fiscal 2019 as well as some new moves on pricing in 2020 that should be smaller in magnitude.
Visa also highlighted some events that could help support revenue and volume growth, including the Tokyo Olympics in summer 2020. Japan is primarily a cash-driven country, but its government is using the Olympics as a way to drive payments digitization and is rolling out infrastructure to support these efforts. Visa is a longtime sponsor of the Olympics and will have a big presence once again at the games.
“It’s very exciting when a government decides to use the Olympics to move toward cashless,” Prabhu told MarketWatch.
Prabhu spoke as well about Visa’s positioning in Europe more than three years after its deal for Visa Europe closed. He sees “lots of opportunity to grow” in markets like Germany, Spain and Italy, as well as an overall chance to improve credit penetration in Europe, as debit is still prominent. “The acquisition has been nothing short of a home run for us,” he said, pointing to accretion in the double digits.
Shares have gained 34% so far this year, as the Dow Jones Industrial Average DJIA, -0.11% has risen 15%.
Add Comment