Quarterly earnings were a bit of a good-news/ bad-news scenario for Visa (NYSE:V) — or perhaps more like good news and slightly disappointing news.
The good news is that Visa easily beat revenue and earnings estimates and had an overall strong quarter. The slightly disappointing news was its outlook for 2024, which caused the company’s stock price to drop by about 2% after the market opened on Friday.
Resilient consumer spending boosts payment volumes
For its first fiscal quarter of 2024, Visa posted a 9% year-over-year revenue spike to $8.6 billion, while its net income jumped 17% to $4.9 billion and its earnings per share increased 20% to $2.39 per share.
Visa was buoyed by an 8% year-over-year gain in payments volume across its network as consumers spent $3.3 trillion in the quarter. Cross-border volume was up 16%, while the number of transactions processed grew 9% to 57.5 billion. While strong, payment volume and transactions growth rates were slightly lower than anticipated by analysts. Additionally, net income jumped on a 6% decrease in operating expenses in the quarter.
“Consumer spending remained resilient,” said Visa CEO Ryan McInerney in a statement. “Looking ahead, we continue to see significant opportunity across consumer payments, new flows and value-added services.”
Visa was also busy on the acquisition front in the last quarter, signing an agreement to buy Prosa, a Mexico-based payments processor. It also closed on a previously announced deal to buy Pismo, a company that provides issuer processing and core banking in Latin America, Asia Pacific and Europe. Basically, the company enables its customers to launch payments and banking products within a single cloud-native platform.
Other highlights of the quarter included $3.4 billion in share repurchases, or 14 million shares at an average price of $239.45 per share. Visa also maintained its dividend at 52 cents per share in what will be its 16th consecutive year of increasing its annual dividend.
Outlook spooks investors
There was certainly a lot to like in the earnings report, especially when combined with the news on Friday that the U.S. gross domestic product (GDP) grew by 3.3% in the last quarter and 2.5% for 2023. Both numbers were better than estimates, so you might think a stock like Visa that feeds off of consumer spending and a strong economy would spike.
However, the slightly disappointing news was that Visa’s forecast for second-quarter growth was a little lower than investors may have anticipated. Visa called for upper-mid to high single-digit revenue growth in the fiscal second quarter, and that is a little less than the 11% growth for the same quarter a year ago. Meanwhile, the company’s guidance for operating expenses is low double-digit growth, which is on par with the fiscal Q2 of 2023.
For the full fiscal year, Visa calls for high single-digit to low double-digit revenue growth, which is roughly on par with its 2023 net revenue growth.
The post-earnings sell-off looks like a bit of a short-term overreaction by investors. Visa looks to be in good shape, and if the positive economic momentum continues to surprise in 2024, it will be in even better shape.
Visa remains a reasonably valued, high-margin company that is a leader in its space, which is protected by an economic moat. It remains a solid long-term buy.