Visa stock reaches new all-time high ahead of Q3 earnings results

Payment gateway firm Visa Inc (NYSE: V) is set to report its third quarter 2019 earnings results coming Tuesday after the market closes. On average, analysts predict the company to earn $1.32 per share on revenue of $5.7 billion. This represents year-over-year growth of 10% in the earnings and 9% in the revenue. Visa stock reached a new all-time high ($181.84) when it opened today and ended the day down 0.71% at $179.24.

Once again, Visa’s Q3 results are expected to benefit from the continued growth in the processed transactions, payments volume and cross-border volume, thanks to increased consumer spending. The company had surpassed earnings estimates in the past four quarters.

Looking Back

For the second quarter ended March 31, 2019, Visa earned $1.31 per share on revenue of $5.5 billion. While earnings beat estimates, revenue was in line with the consensus views. On a nominal basis, processed transactions and payments volume grew 11% and 4%, respectively. Cross-border volume dropped 2%.

Outlook

Visa had projected third quarter net revenue growth to be similar to moderately better than the second quarter. Third quarter expense growth is touted be in line with the second quarter.

Fourth quarter net revenue is projected to grow in the low double-digit range. Expenses in the fourth quarter are expected to grow at the lowest rate for the year.

Net revenue growth expectations maintained at low double digits on a nominal basis and expense growth expectations remained in the mid-single digits. The company lifted its EPS growth expectations to the high end of mid-teens on an adjusted non-GAAP nominal dollar basis and the low 20s on a GAAP nominal dollar basis.

Recent Developments

Visa won the battle with its competitor Mastercard (NYSE: MA) on acquiring the UK-based Earthpost in May. Earthport provides cross-border payment services to banks, money transfer service providers and businesses via the world’s largest independent ACH network.

In June, Visa acquired the token services and ticketing businesses from Rambus (NASDAQ: RMBS) and signed a definitive agreement to acquire Verifi, a leader in technology solutions that reduce chargebacks. On Wednesday, the San Francisco-based firm acquired Payworks, a Munich-based provider of next-generation payment gateway software for the Point of Sale (POS).

Read: American Express Q2 results beat on strong card member spending; reaffirms FY19 outlook

On June 11, Visa launched Visa B2B Connect network globally. This will enable financial institutions to quickly and securely process high-value corporate cross-border payments all over the world. The Visa B2B Connect launch will cover more than 30 global trade corridors, with an aim to expand to as many as 90 markets by the end of 2019.

Visa’s Views on US Economy

Visa sees more downside risks to growth than upside over the next two years. While tariffs on Mexico have been avoided, there remains a risk of further tariffs on imports from China. This would create a challenge for the Fed in trying to balance job growth and keep inflation in check.

Read: Visa Q2 Earnings Call Transcript

Manufacturing is likely to continue to bear the brunt of any new tariffs and slow the growth of consumer spending on such goods. In the near-term, Visa reported that it expects higher inflation readings from the starting of the third quarter of this year.

Peers

Visa’s peer American Express (NYSE: AXP) reported its second quarter results today. Another digital payment giant Mastercard (NYSE: MA) will release its second-quarter 2019 financial results on July 30.

Stock Movement

Visa stock had given a positive return of 36% so far this year while Mastercard’s stock value had jumped 46% in the same period. In the past 12 months, shares of Visa and Mastercard have grown 28% and 34%, respectively.

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