Visa Inc (NYSE: V) Q1 Earnings Preview: Don’t Expect Surprises

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Global payments technology company Visa Inc (NYSE:V) is expected to release its first quarter earnings results on Wednesday, May 1, 2013. Analysts at Jefferies don’t expect major surprises in its results.

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Jefferies analysts predict less top-line risk and higher probability of a modest EPS guidance raise for Visa Inc (NYSE:V). They anticipate key topics on the calls would hover around V/JPM deal, European regulatory developments, and mobile growth initiatives.

Analysts at Jefferies anticipate Visa Inc (NYSE:V) to maintain its F13 guidance of low double digits net revenue growth. However they feel the continuation of robust overall volume trends, favorable mix, ongoing tax rate management, and share buyback activity could raise V’s F13 EPS growth guidance on the upcoming earnings call.

Jason Kupferberg and his colleagues feel Visa trades at a ~9 percent premium to Mastercard Inc (NYSE:MA) on C14 P/E. Some of the factors contributing to their view are: 1) Visa’s lack of European exposure, 2) Visa’s sizeable share gains Vs. MasterCard in the high-yielding US credit market, 3) higher likelihood of Visa raising guidance than MasterCard.

Jefferies analysts feel lingering economic uncertainty may provide Visa Inc (NYSE:V) a modest headwind to domestic and cross-border payment volumes, and along with a tough F12 comparison, top-line growth is expected to decelerate slightly against 13.9 percent in F12. However they believe upside to F13 top-line outlook is possible if there is noticeable macro improvement during the year.

On the volumes front, the analysts feel Visa Inc (NYSE:V) saw the greatest Durbin-related negative impact to PIN debit volumes in F3Q12, (particularly in the month of April), which should gradually moderate until finally anniversarying in F3Q13.

The hearing for final approval for proposed settlement rule changes related to surcharging, collective bargaining, and other items is scheduled for 9/12/13. Jefferies analysts anticipate the potential for increased head-line related volatility of shares of V/MA as upcoming milestones come to pass. However Jefferies expect a high likelihood the settlement will eventually be approved and implemented largely as proposed last summer.

Turning to expenses / margins front, based on Visa’s F1Q13 earnings call, Jefferies analysts believe the company continues to expect a ~60 percent F13 operating margin. F13 marketing and advertising expense is expected to again come in “under $1B”, though management expects a modest uptick from F12’s $873M driven by greater investment in the CEMEA region and initiatives.

Jefferies analysts slightly increased their C1Q revenue estimate to $2,837.0 M (from $2,819.7M previously) and their C1Q EPS estimate to $1.80 (vs. $1.74 prior) as they feel favorable mix could help margins.

Jefferies analysts retained $196 price target for Visa based on 22x their C14 EPS estimate of $8.69. In terms of forward P/E multiples, they feel Visa Inc (NYSE:V) is trading at a slight premium over Mastercard Inc (NYSE:MA) on a forward calendar basis as against the historical average of a ~11 percent premium.

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