Visa Stock: Q1 Earnings Could Beat Estimates Thanks to Higher Volumes

Visa Stock

Visa Stock (NYSE:V)

Visa Inc. (NYSE:V) financial results for the first quarter of the fiscal year 2023 are scheduled to be revealed on January 26, 2023, after the closing bell. It is anticipated that Visa will continue its record of beating expectations for earnings.

The continued growth in payment volume, cross-border volume, and processed transactions helped the payments technology company beat the Consensus Estimate for its adjusted earnings per share in the most recent quarter, which came in at $1.93. This was primarily due to the company’s ability to process more transactions. Additionally, spending on travel and entertainment was higher when compared to the same period the previous year. However, increasing operational costs cancel out the positives of the situation.

While the Dow Jones dropped 2% in the past year, Visa stock did pretty well, with a return close to 12%.

Now that we are getting closer to the earnings report for the first quarter of the fiscal year 2023, let’s look at how things currently stand.

Estimate Revision Trend

The Consensus Estimate for earnings per share in the first quarter of fiscal 2023 is currently set at $2. Over the past week, there has been one upward revision and one downward shift. The estimate suggests that there was a 10.5% increase from the amount that was published the previous year. Our projection of $1.97 per share reflects a growth of 8.6% compared to the previous year. In the most recent four quarters, Visa delivered an average earnings beat of 8.3%, beating analyst projections in each of those periods. 

The Consensus Estimate for revenues is set at $7.7 billion, which suggests an 8.8% leap from the amount that was reported the previous year. Our estimate, on the other hand, forecasts an 8% increase from the previous year’s reported figure.

The company’s Earnings Expansion Strategy is +0.79%. The Most Accurate Estimate sets the company’s earnings per share at $2.02, which is higher than the Consensus Estimate of $2. 

Key Factors Impacting Earnings

It is anticipated that increased spending connected to travel and entertainment contributed significantly to Visa’s performance in the first quarter of the fiscal year. It is anticipated that the utilization of digital payment methods has continued during the period under consideration.

The Consensus Estimate for total volume, which consists of cash volume and payment volume (the primary lever of service revenues), indicates an increase of 5.4% from the year-ago period’s reported figure. This estimate was derived by comparing the reported figure for the current period to the figure that was reported for the previous period. According to our estimation, the metric experienced a growth of 9% throughout the period under consideration.

When a client uses their debit or credit card to make a payment, the company generates revenues equal to a predetermined percentage of the overall transaction value. As a result, the more money a client spends, the more money the company makes in the form of transaction processing fees. The general consensus mark and our own estimate for the total payments transactions point to a growth of 12.4% as compared to the previous year. It is anticipated that the metric for activities only in the United States will increase by 10.7% year on year.

In the first quarter of the fiscal year, we anticipate that revenues from data processing would increase by 8.4% year over year. It is anticipated that Visa’s operating efficiency improved during the first quarter of the fiscal year 2023 due to an increase in the volume of processed transactions and payments. It is anticipated that this has positioned the company to achieve year-over-year growth in its bottom line and a beat in earnings.

On the other hand, it is likely that growing expenses have neutralized mainly the good effects that the increased volumes had. As a result of increases in the costs associated with Personnel, Network and Processing, and Professional Fees, we anticipate that the total adjusted operating expenses for the quarter under consideration will rise by 13.5% year over year.

Visa stock has gained nearly 9% so far this year.

Featured Image: Pexels @ Karolina Grabowska

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About the author: Stephanie Bedard-Chateauneuf has over six years of experience writing financial content for various websites. Over the years, Stephanie has covered various industries, with a primary focus on tech stocks, consumer stocks, health stocks, and personal finance. This stock lover likes to invest for the long-term. Stephanie has an MBA in finance.