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Why Is Visa (V) Down 4.8% Since Last Earnings Report?

Zacks Equity Research
·4-min read

It has been about a month since the last earnings report for Visa (V). Shares have lost about 4.8% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Visa due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Visa’s Q2 Earnings Beat Estimates on Solid Payments Volume

Visa reported second-quarter fiscal 2022 earnings of $1.79 per share, which beat the Zacks Consensus Estimate by 8.5%. The bottom line improved 30% year over year.

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Net revenues of $7.2 billion climbed 25% year over year in the quarter under review. The top line outpaced the consensus mark by 5.1%

Visa’s quarterly results benefited from strong growth in payments volume, processed transactions and cross-border volume, partly offset by elevated operating costs.

The leader in digital payments expects growth for its businesses to continue in the days ahead, courtesy of solid recovery in travel and by empowering consumers with traditional and newer ways to pay globally.

Operational Performance

Payments volume of Visa on a constant-dollar basis climbed 17% year over year in the March-quarter. Reflecting transactions processed by Visa, processed transactions rose 19% year over year to 44.8 billion.

On a constant-dollar basis, total cross border volume of Visa improved 38% year over year in the quarter under review. Meanwhile, its cross-border volume, excluding transactions within Europe, surged 47% year over year on a constant-dollar basis. The metric usually bolsters V’s international transaction revenues.

Service revenues grew 24% year over year to $3.5 billion on the back of higher payments volume in the prior quarter. While data processing revenues of $3.5 billion climbed 16% year over year, other revenues grew 21% year over year to $474 million. International transaction revenues of $2.2 billion surged 48% year over year in the March-quarter.

Client incentives amounted to $2.5 billion, which increased 25% year over year.

Operating expenses escalated 16% year over year due to a rise in marketing, personnel as well as general and administrative expenses.

Interest expense of $134 million increased 10.7% year over year in the quarter under review.

Balance Sheet (as of Mar 31, 2022)

Visa exited the March-quarter with cash and cash equivalents of $12.3 billion, which decreased 25.4% from fiscal year end Sep 30, 2021.

Total assets were $81.8 billion, down 1.3% from fiscal year end Sep 30, 2021.

Long-term debt declined 12.5% from fiscal year end Sep 30, 2021 to $17.5 billion. Current maturities of debt amounted to $3.5 billion.

Cash Flow

During the quarter under review, net cash provided by operating activities improved 4.8% from the year-ago comparable period to $3.5 billion. Free cash flow was recorded at $3.2 billion in the quarter under review, up 1.6% year over year.

Boosting Shareholder Value

Visa returned $3.7 billion to shareholders through share repurchases and dividends in the March-quarter. As of Mar 31, 2022, V had leftover authorized funds of $9.7 billion under its share buyback program.

On Apr 22, 2022, Visa’s board of directors approved a quarterly cash dividend of 37.5 cents per share. The dividend will be paid on Jun 1, 2022 to shareholders of record as of May 13.

 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Visa has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Visa has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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