Will Higher Payment Transactions Lift Visa (V) Q1 Earnings?

Visa Inc.'s V fiscal first-quarter earnings should see an upside from increased payment transactions. 

Transactions processed on Visa cards have been on a rise from past many years, which is directly proportional to the company’s revenue growth. Visa makes money in two ways. First, they get a fixed amount on all money that is spent using their co-branded cards. Their second stream of revenues is from Data Processing, which means facilitating the transaction and settlement of transactions.

A strong economy fuelled consumer spending which should have aided payment transaction growth. Also, continued growth of checks and digital payment methods supported increase in payment transactions. The Zacks Consensus Estimate for total payment transaction is 39.25 billion, up 11.2% year over year. This should be driven by payments transaction growth from Asia Pacific, Canada, Cemea, Lac and United States. The Zacks Consensus Estimate for Asia Pacific, Canada, Cemea, Lac and United States are pegged at 6.4 billion, 850 million, 3.58 billion, 3.32 billion and 16.55 billion, respectively, reflecting year-over-year increase of 13.9%, 10%, 26.8%, 5.3% and 8.2%.

Overall Visa’s earnings are likely to reflect solid revenue growth led by factors such as increased spending as the economy continues to grow and shift toward spending on cards and increased pricing.

Growth in processed transaction is likely to push up Data Processing fees. The Zacks Consensus Estimate for the same is $2 billion, up 20% year over year.

Also, lower-than-expected incentives must have aided margins, as Visa has slightly delayed moving some European clients to an incentive structure. A moderation in the exchange drag will also aid margins.  

The company has accelerated share buyback activity to offset the equity dilution from the Visa Europe transaction. Increased share buyback will provide an added shield to its bottom line. (Read more: Will Revenues, Payment Volumes Drive Visa Q1 Earnings?)

Visa, one of the world’s largest retail electronic payments networks based on payments volume and number of transactions, carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

Here are some other companies from the same space that are poised for a beat based on our model.

FleetCor Techologies, Inc. FLT is expected to report fourth-quarter 2017 earnings results on Feb 14. The company has an Earnings ESP of +0.59% and a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

WEX Inc. WEX has an Earnings ESP of +1.12% and a Zacks Rank of 1. The company is expected to report fourth-quarter earnings results on Feb 21.

Mastercard Inc. MA has an Earnings ESP of +0.33% and a Zacks Rank of 2 (Buy). The company is expected to report fourth-quarter earnings results on Feb 1.

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