Yahoo Finance The Zacks Analyst Blog Highlights Visa, American Express and Mastercard
For Immediate Release
Chicago, IL – April 25, 2024 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Visa Inc. V, American Express Company AXP and Mastercard Incorporated MA.
Here are highlights from Wednesday’s Analyst Blog:
Is More Upside Left for Visa After Solid Fiscal Q2 Earnings?
Payment technology company Visa Inc. posted encouraging fiscal second-quarter earnings results on the back of an uptick in travel and strong spending patterns that defied sticky price pressures. The payment company registered a net income of $4.7 billion, or $2.29 per share, in the first quarter, up from $4.3 billion, or $2.04 a share, a year ago.
Visa generally earns a percentage from every debit and credit card transaction involving its products. Thus, a steady rise in consumer spending increased the fintech company's payment volume by 8% for the quarter, and the processed transactions jumped 11%. Its share prices also outperformed the Financial Transaction Services industry so far this year (+5.3% versus +4.2%).
What's more, consumers' spending activity is poised to improve due to the strength in the labor market. Jobs are being added steadily, the jobless rate is at a record low, wages are improving, and there are fewer layoffs. Workers' productivity has also gone up, which should boost economic growth. At the same time, threats of an impending recession have ebbed, a tailwind for travel plans.
Henceforth, the present strength among consumers will entice them to swipe their credit cards more often and shrug off higher rates on card-related transactions, eventually boosting the payment processing network company's earnings and share price. Lest we forget, earnings growth is the most important variable that exerts influence on the share price.
Visa, in reality, has been proficiently generating profits since it has a return on equity of 50%, which is typically considered exceptional. The company is also capable of generating the desired profit from sales since it has a net profit margin of 53.9%, way higher than the 20% threshold, indicating a high margin.
The downside risk of the stock is also limited. After all, Visa carries a low beta of 0.96 (ranges from 0 to 1), making it immune to market vagaries. At the same time, Visa has raised dividends for its shareholders for quite some time, a tell-tale sign that the company has a solid financial structure and a better-quality business.
Visa has a dividend yield of 0.76%. Visa's payout ratio presently sits at 23% of earnings. In the past 5-year period, Visa has increased its dividend five times, and its payout has advanced 15.7%. Check Visa's dividend history here.
Visa's revenues for the fiscal second quarter, by the way, increased to $8.78 billion, up 10% from the year-earlier period. To top it, management has heaved a sigh of relief as they expect a low double-digit revenue growth for the full year. This is particularly because of Visa's tactical acquisitions and unions, which expanded its global footprint. Needless to say, revenue growth too can drive up the stock price.
It's worth pointing out that Visa is aiming to accommodate both card-based and cloud computing-based digital payments in its new strategy called network of networks. This initiative will undoubtedly help Visa's revenues in due course to outdo the low single-digit growth it has mostly seen since it started publicly trading in 2008. This will also give the company a competitive edge over its archrivals, American Express Company and Mastercard Incorporated.
Hence, it can be safely concluded that Visa's shares are well-poised to gain traction, and astute investors with a long-term mindset should keep an eye on this fantastic stock. Visa' expected earnings growth rate for the current and next year is 12.7% and 11.8%, respectively. Its estimated revenue growth rate for the current and next year is 9.2% and 9.1%, respectively.
The Zacks Consensus Estimate for Visa's current-quarter earnings has moved up 0.4% over the past 60 days. Visa currently has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Mastercard Incorporated (MA) : Free Stock Analysis Report
Visa Inc. (V) : Free Stock Analysis Report
American Express Company (AXP) : Free Stock Analysis Report
