Visa Inc. V reported fiscal first-quarter 2023 earnings of $2.18 per share, which beat the Zacks Consensus Estimate of $2.01 by 8.5% and our estimate of $1.97. The bottom line improved 21% year over year.
Net revenues amounted to $7.9 billion, which advanced 12% year over year in the quarter under review. The top line outpaced the consensus mark by 3.4% and our estimate of $7.6 billion.
The solid quarterly results benefited on the back of steady domestic volumes and transactions coupled with a continued rebounding of cross-border travel. Growing net flows and value-added services also contributed to the upside. Other additional tailwinds to its quarterly results included those of high currency volatility and lower-than-expected client incentives.
Visa Inc. Price, Consensus and EPS Surprise
Visa Inc. price-consensus-eps-surprise-chart | Visa Inc. Quote
Visa’s payments volume grew 7% year over year on a constant-dollar basis in the December quarter. Processed transactions (implying transactions processed by Visa) totaled 52.5 billion, which rose 10% year over year but lagged our estimate of 52.8 billion.
On a constant-dollar basis, the cross-border volume of Visa climbed 22% year over year in the quarter under review. Excluding transactions within Europe, its cross-border volume (that boosts a company’s international transaction revenues) advanced 31% year over year on a constant-dollar basis.
Service revenues improved 10% year over year to $3.5 billion during the December quarter on the back of better payment volume. The metric came higher than the Zacks Consensus Estimate and our estimate of $3.4 billion.
V’s data processing revenues of $3.8 billion grew 6% year over year in the quarter under review, missing the consensus mark of $4 billion and our estimate of $3.9 billion.
International transaction revenues advanced 29% year over year to $2.8 billion, which outpaced the Zacks Consensus Estimate and our estimate of $2.6 billion. Other revenues of $587 million climbed 31% year over year, which came higher than the consensus mark of $511 million and our estimate of $522.7 million.
Client incentives (a contra-revenue item) of Visa escalated 18% year over year to $2.8 billion in the quarter under review. The metric amounted for 26% of Visa’s gross revenues of $10.7 billion.
Operating expenses of $2.8 billion increased 25% year over year, higher than our estimate of $2.5 billion. The increase was due to elevated personnel costs and litigation provisions. Non-GAAP operating expenses escalated 15% year over year. Interest expense came in at $137 million, up 2.2% year over year.
Balance Sheet (as of Dec 31, 2022)
Visa exited the December quarter with cash and cash equivalents of $13.3 billion, which dropped 15% from fiscal year-end Sep 30, 2022.
Total assets of $85.4 billion dipped 0.1% from the 2022 fiscal year-end.
V’s long-term debt amounted to $20.5 billion, which inched up 1.4% from fiscal year-end Sep 30, 2022.
Total equity grew 3.8% from the 2022 fiscal year-end to $36.9 billion.
Visa generated net cash from operations of $4.2 billion in the December quarter, which declined 1.4% year over year. Free cash flows of $3.9 billion fell 3.4% year over year.
Capital Deployment Update
Visa rewarded $4 billion to shareholders via share buybacks of $3.1 billion and dividends of $945 million in the December quarter. V had remaining authorized funds of $14 billion under its share buyback program as of Dec 31, 2022.
On Jan 24, 2023, management sanctioned a quarterly cash dividend of 45 cents per share, which will be paid out on Mar 1, 2023 to shareholders of record as of Feb 10, 2023.
Fiscal 2Q23 Outlook
Net revenue is estimated to register high single-digit growth on a nominal dollar basis. Client incentives are expected to remain at the upper side of the 26.5%-27.5% of gross revenues band.
The strength in domestic payments volume and processed transactions are expected to stay in the fiscal second-quarter 2023. While the discontinuation of Russian operations might spare processed transactions growth, it is likely to have an adverse impact on payment volume growth rates in the upcoming quarter.
Non-GAAP non-operating expenses are projected to lie within $40-$50 million in the second quarter.
Operating Expense Outlook Through Fiscal 2023
Non-GAAP operating expense is likely to witness a declining trend throughout fiscal 2023. From the expense growth recorded in the fiscal first-quarter 2023, the growth of expense on a nominal dollar basis is anticipated to decline two or three points in the fiscal second-quarter 2023. The non-GAAP operating expense growth rate in the third quarter is likely to face a further reduction of two to three points, while the same in the fourth quarter might witness another two to three-point decline.
Visa currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Business Services Sector Releases
Of the Business Services sector players that have already released quarterly results so far, the bottom-line results of Mastercard Incorporated MA, Xerox Holdings Corporation XRX and Automatic Data Processing, Inc. ADP beat the respective Zacks Consensus Estimate.
Mastercard reported fourth-quarter 2022 adjusted earnings of $2.65 per share, which outpaced the Zacks Consensus Estimate. The bottom line advanced 13% year over year. MA’s revenues amounted to $5,817 million, which rose 12% year over year in the quarter under review. The top line beat the consensus mark of $5,766 million. MA’s Gross Dollar Volume (representing the aggregated dollar amount of purchases made and cash disbursements obtained from MasterCard-branded cards) improved 8% year over year on a local-currency basis to $2,133 billion.
Xerox’s fourth-quarter 2022 adjusted earnings per share of 89 cents beat the Zacks Consensus Estimate by 64.8% and increased more than 100% year over year. Total revenues of XRX amounted to $1.9 billion, which surpassed the consensus mark by 4% and increased 9.2% year over year on a reported basis. Xerox’s Print and Other segment revenues totaled $1.8 billion, up 11.1% year over year. The Financing (FITTLE) segment’s revenues totaled $151 million, down 9.6% year over year.
Automatic Data Processing reported second-quarter fiscal 2023 adjusted earnings per share of $1.96, which beat the Zacks Consensus Estimate by 0.5% and grew 19% from the year-ago fiscal quarter’s reading. ADP’s total revenues of $4.4 billion beat the Zacks Consensus Estimate by 0.3% and improved 9.1% from the year-ago fiscal quarter’s reading on a reported basis and 10% on an organic constant-currency basis. Employer Services’ revenues of $2.9 billion increased 8% on a reported basis and 10% on an organic constant-currency basis. Pays per control of ADP increased 5% from the year-ago fiscal quarter’s reading.
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