Visa's (V) Q1 Earnings Beat on Solid Transaction Growth

Visa Inc. V reported first-quarter fiscal 2022 earnings of $1.81 per share, which outpaced the Zacks Consensus Estimate of $1.69. The bottom line also increased 27% year over year.

Net revenues rose 24% year over year to $7,059 million for the quarter under review. The top line also beat the consensus mark of $6,769.

The strong first-quarter fiscal 2022 results were aided by solid growth in payments volume, processed transactions and cross-border volume. Increasing consumer spending, with growth in eCommerce and travel, aided the results.

The company expects the momentum to continue in the days ahead, backed by recovery in the economies around the world and increasing cross-border traveling despite the current rise in coronavirus cases.

Visa Inc. Price, Consensus and EPS Surprise

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

Operational Performance

Payments volume of Visa climbed 20% year over year to $2,966 billion for first-quarter fiscal 2022. The company’s processed transactions grew 21% year over year to 47.6 billion, courtesy of domestic and international transactions.

Total cross-border volume improved 40% year over year for the quarter. Its cross-border volume excluding transactions within Europe rose 51% year over year. Increase in cross-border volume usually bolsters the company’s international transaction revenues.

Service revenues surged 19% year over year to $3,193 million, driven by improved payments volume recorded in the prior quarter. While data processing revenues climbed 19% from the prior-year quarter to $3,614 million, international transaction revenues of $2,174 million soared 50% year over year. Other revenues grew 17% year over year to $449 million.

Client incentives increased 28% year over year to $2,371 million for the quarter under review. Operating expenses of $2,115 million escalated 16% year over year due to a rise in marketing, personnel and professional fees. Interest expense marginally declined to $134 million for the quarter.

Cash Flow

Operating cash flow for the quarter under review was $4,232 million, up from $3,513 million a year ago. Free cash flow was recorded at $4,059 million in the quarter.

Balance Sheet (as of Dec 31, 2021)

Visa exited the quarter with cash and cash equivalents of $14,720 million, which decreased sequentially from $16,487 million. Total assets were $81,929 million, sequentially down from $82,896 million.

Long-term debt decreased to $17,673 million from $19,978 million in the prior quarter. Current maturities of debt totaled $3,247 million on Dec 31, 2021.

Boosting Shareholder Value

In the quarter under review, the company returned $4.9 billion to shareholders through dividends and repurchases. As of Dec 31, 2021, V had $12.6 billion remaining under its share buyback program.

Zacks Rank & Key Picks

Visa currently has a Zacks Rank #3 (Hold). Some better-ranked players in the Business Services space include Affirm Holdings, Inc. AFRM, Vasta Platform Limited VSTA and Palantir Technologies Inc. PLTR, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Headquartered in San Francisco, CA, Affirm Holdings provides a platform for digital and mobile-first commerce for clients located in the United States and Canada. The Zacks Consensus Estimate for AFRM’s earnings suggests an increase of 4.7% year over year. The consensus mark for Affirm Holdings’ revenues for the current year indicates a 45.7% year-over-year rise.

Vasta Platform is a provider of educational and digital solutions in schools in a specific sector in Brazil. Based in Sao Paulo, VSTA’s Digital Platform business offers physical and digital e-commerce platform services. The Zacks Consensus Estimate for Vasta Platform’s bottom line indicates 27.3% year-over-year growth. The consensus mark for revenues is pegged at $177.6 million.

Palantir Technologies develops software platforms for the defense and intelligence sectors. The consensus mark for Denver, CO-based PLTR’s bottom line for 2022 implies a jump of 46.7% year over year. In the last four quarters, Palantir Technologies beat earnings estimates twice and met the same on the other two occasions, with an average surprise of 70.8%.

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