Visa (V) Gears Up for Q3 Earnings: What's in the Offing?

Visa, Inc. V is set to report third-quarter fiscal 2020 earnings on Jul 28, after the market closes.

The company delivered an earnings surprise of 2.96% in the last reported quarter.

Let’s see how things have been shaping up for this announcement.

We expect results to reflect higher payments volume and processed transaction, partly offset by a decline in cross-border revenues, which were affected by the spending cuts due to the COVID-19 outbreak.

Management recenty informed that the company’s business started  picking up, driven by a rise in spending owing to relaxation in shelter-in-place restrictions, which were earlier enforced to limit the spread of the coronavirus pandemic. The rebound in business might reflect on the impending quarterly results.

In May, total U.S. payments volume declined 5% year over year, reflecting a 13% improvement from April reading. Debit payments grew 12% while credit payments declined 21% year over year in May, reflecting a 17% and 9% improvement from April-levels, respectively.  The Zacks Consensus Estimate of $1.92 trillion for U.S. payments volume in the fiscal third quarter indicates a 13.9% fall from the year-ago reported quarter.  

International markets have been in various phases of reopening for a while now. Management reported that a revival in the international markets wherein the company carries out its majority transactions lagged the recovery in the United States during May.

Visa’s cross-border volumes excluding intra-Europe transactions (which perks up its international transaction revenues) plunged 45% in May, though bettering 6% from the level recorded in April. Travel-related cross-border volumes (card present and card not present) slumped 78% in May while cross-border e-commerce (excluding travel) volumes made a consistent surge, reflecting a solid upside of 18%.  The company is thus likely to report a decline in cross border transaction volumes in the to-be reported quarter, which will in turn drag International transaction revenues.

The Zacks Consensus Estimate for International transaction revenues is pegged at $1.27 billion down 36% year over year.

Earnings & Revenue Expectations

The Zacks Consensus Estimate for Visa’s third-quarter fiscal 2020 earnings of $5.01 per share implies a 7.9% deterioration from the prior-year reported number. Likewise, the consensus estimate for sales of $21.9 billion suggests a 4.7% slip from the year-ago reported figure.

Earnings Surprise History

The company boasts an attractive earnings surprise record. Its bottom line surpassed estimates in each of the last four quarters, the average being 6.25%. This is depicted in the chart below:

Visa Inc. Price and EPS Surprise

Visa Inc. Price and EPS Surprise

Visa Inc. price-eps-surprise | Visa Inc. Quote

Earnings Whispers:

Our proven model predicts a beat for Visa this earnings season. The combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — increases the odds of a positive earnings surprise.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Visa has an Earnings ESP of +0.94%.

Zacks Rank: Visa currently carries a Zacks Rank #4 (Sell).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Stocks That Warrant a Look

Some stocks worth considering from the same space with the right combination of elements to beat on earnings this time around are:

Global Payments Inc. GPN has an Earnings ESP of +9.29% and a Zacks Rank #3, currently.

Mastercard Inc. MA has an Earnings ESP of +1.27% and is Zacks #3 Ranked at present.

PayPal Holdings, Inc. PYPL has an Earnings ESP of +3.96% and a Zacks Rank of 3, presently

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With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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