Earnings Preview: Visa all set to report Q2 results amidst slowing growth concerns

Visa (V) is slated to report its second-quarter results tomorrow after the bell. Stocks of the payment processing giant have increased 23% this year as the company continues to report solid results. Investors would be expecting solid results in the second quarter carrying on the momentum from the last quarter.

For the second quarter, analysts are expecting EPS to improve 11.7% to $1.24 and sales to come in at $5.46 billion, an increase of 7.6% over last year. Investors expect Visa to continue its track record of top and bottom line beat as the underlying fundamentals remain strong.

On the key business metrics front, payment volumes and transactions processed by Visa are expected to grow double-digits. However, last quarter the company has cautioned investors that growth is slowing in markets like the US, UK, and Brazil. In addition, the ongoing tariff wars and Brexit could act as a headwind in the current fiscal period. One has to wait till tomorrow to know more insights from the management on how the macros are going to impact the firm in the near future.

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Earthport Deal

After months of intense pricing battle with rival Mastercard (MA), Visa finally bought Earthport for $320 million after Mastercard backed out of the bidding. The UK-based company is a pioneer in cross-border payments space making the entire process simple and transparent. This deal will augur well for Visa to reduce expenses on the cross-border payments front.

Visa will also be able to expand its cross-border payment offerings as there is the huge market potential to tap in the B2B payments and remittances made by individuals. It’s worth noting that last quarter Visa’s cross-border saw a muted growth of 7%. The company blamed it on the ongoing trade wars, Brexit and weak macros. The Earthport deal would be a tailwind to Visa in the impending future.

Fiscal 2019 Outlook

In the first quarter, Visa maintained its outlook with revenue to grow in the low-double digits and adjusted earnings to see mid-teens growth. Operating expense is expected to increase in the single digits as it continues to invest in people and marketing front.

Looking Back

Last quarter, Visa reported 18% jump in earnings and sales increased 13% helped by growth in payments volume, cross-border volume, and processed transactions, exceeding street estimates. On a constant dollar basis, payments volume rose 11% and cross-border volume grew 7%. Total processed transactions increased by 11% to 33.9 billion.

Mastercard is scheduled to report its first-quarter results on April 30 before the bell.

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