Visa Inc. (V), a global payment technology company, reported solid second-quarter financial results on April 23, 2024. The company reported a quarterly net revenue of $8.77 billion, indicating an increase of 9.9% from the prior year’s quarter.
Moreover, revenue from the Data processing revenue segment rose 12% year-over-year to $4.26 billion and revenue from International transaction was up 9% year-over-year. Also, the company posted non-GAAP EPS of $2.29, up 12% from the year-ago value.
Analysts expect V’s revenue and EPS for the third quarter (ending June 2024) to increase 9.9% and 12% year-over-year to $8.93 billion and $2.42, respectively.
During the second quarter, Visa relaunched Visa SavingsEdge, aimed at delivering greater value to small businesses across the US and Canada to bring new features to support smarter spending and savings for cardholders and issuers. The latest enhancements was aimed to introduce a more dynamic platform with new offerings and features designed to support smarter spending and saving.
The company also announced a suite of new products and services for Asia Pacific region to revolutionize the card and address the future needs of businesses, merchants and consumers, and the financial institutions that serve them.
Further, on April 23, the Board of Directors declared a quarterly cash dividend of $0.52 per share of class A common stock paid on June 3, 2024, to all holders of record as of May 17, 2024. The company also repurchased 9.7 million shares of class A common stock at an average price of $280.80 per share for $2.7 billion. Visa had $23.6 billion of remaining authorized funds for share repurchases as of March 31, 2024.
Ryan McInerney, Chief Executive Officer, Visa, commented, "Visa delivered strong results in the second quarter, with net revenue up 10%, GAAP EPS up 12%, and nonGAAP EPS up 20%. Overall payments volume grew 8% and cross-border volume grew 16%, driven by stable consumer spending.”
He added, “As we head into the second half of the year and beyond, we remain focused on the trillions of dollars of opportunity in consumer payments and new flows and on continuing to deepen our partnerships with clients around the world by adding value across our network of networks."
Shares of V have surged 6.1% over the past six months and 22.1% over the past year to close its last trading session at $274.98.
Let’s look at factors that could influence V’s performance in the upcoming months.
Positive Recent Developments
On May 28, V unveiled a suite of new products and services to be available in Asia Pacific. The newly launched solutions revolutionizes the card and address the future needs of businesses, merchants and consumers, and the financial institutions that serve them.
On May 16, V and SKUx, a leader in digital instant payments innovation entered into an agreement to accelerate digital transformation for select merchants and consumer packaged goods companies that uses SKUx’s payment-based offer solutions.
The agreement between the companies allow Visa clients to engage directly with SKUx, driving value creation among B2B and B2C payment flows for merchants and manufacturers and will drive customer acquisition, digitize customer care and recovery, and target product-level spend. This will also enhance Visa’s services and enable mutual customers to stay at the forefront of innovation.
On May 7, 2024, V updated its Visa Account Attack Intelligence offering, introducing the VAAI Score, a tool powered by generative AI to identify and score enumeration attacks. By using generative AI to analyze transaction patterns, the tool reduces fraud and operational losses while maintaining V’s performance standards.
Robust Financials
V’s net revenue increased 9.9% year-over-year to $8.77 billion during the second quarter that ended March 31, 2024. The company’s operating income grew marginally from the year-ago value to $5.35 billion. Its non-GAAP net income and EPS came in at $5.12 billion and $2.51, up 16.7% and 20.1% year-over-year, respectively.
In addition, the company’s cash and cash equivalents and total assets stood at $12.99 billion and $92.40 billion as of March 31, 2024.
Solid Historical Growth
V’s revenue and EBITDA have grown at respective CAGRs of 16.9% and 18.1% over the past three years. The company’s EBIT has increased at a CAGR of 18.6% over the same timeframe, while its net income and EPS have improved at CAGRs of 19.9% and 22.7%, respectively.
Furthermore, the company’s total assets and levered free cash flow have improved at respective CAGRs of 4.8% and 20.5%.
Favorable Analyst Estimates
Analysts expect V’s revenue for the third quarter (ending June 2024) to increase 9.9% year-over-year to $8.93 billion. The consensus EPS estimate of $2.42 for the ongoing quarter indicates a 12% year-over-year improvement. Moreover, V has an impressive earnings surprise history, having topped consensus revenue and EPS estimates in each of the trailing four quarters.
For the fiscal year ending September 2024, the company’s revenue and EPS are expected to grow 10.1% and 13.6% year-over-year to $35.94 billion and $9.96, respectively. Additionally, Street expects its revenue and EPS for the fiscal year 2025 to increase 10.5% and 12.5% year-over-year to $39.72 billion and $11.21, respectively.
High Profitability
V’s trailing-12-month gross profit and EBIT margins of 97.81% and 67.26% are 64.1% and 188.5% higher than the respective industry averages of 59.59% and 23.31%. Its trailing-12-month net income margin of 53.86% is 132.5% higher than the industry average of 23.17%. Similarly, its trailing-12-month levered FCF margin of 46.69% is considerably higher than the industry average of 17.54%.
Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 47.93%, 23.87%, and 19.90% favorably compared to the industry averages of 10.58%, 6.91%, and 1.07%, respectively.
POWR Ratings Reflect Promise
V’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. V has an A grade for Quality, consistent with its higher-than-industry profitability.
In addition, the stock has a B grade for Stability, in sync with its 24-month beta of 0.85.
V is ranked #8 in the 44-stock B-rated Consumer Financial Services industry.
Beyond what I have stated above, we have also given V grades for Sentiment, Value, Momentum, and Growth. Get access to all the V Ratings here.
Bottom Line
V reported better-than-expected earnings for the second quarter of fiscal 2024. The company’s strong industry footing, innovative offerings, strategic renovation of its products, and solid financial performance position it for bright long-term prospects.
Given V’s solid financials, accelerating profitability, reliable dividends, and promising growth outlook, this stock could be an ideal buy now.
How Does Visa Inc. (V) Stack Up Against Its Peers?
While V has an overall POWR Rating of B, investors could also check out these other stocks within the B-rated Consumer Financial Services industry with A (Strong Buy) or B (Buy) ratings: Regional Management Corp. (RM), 360 Finance, Inc. (QFIN), and Atlanticus Holdings Corporation (ATLC).
For exploring more A and B-rated industrial stocks, click here.
What To Do Next?
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V shares were trading at $275.10 per share on Tuesday afternoon, down $1.20 (-0.43%). Year-to-date, V has gained 6.06%, versus a 14.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
Is Visa a Top Financial Stock to Buy Now? StockNews.com
