Visa Inc. (V) is a global payment technology company. V operates VisaNet, a transaction processing network, and offers credit, debit, and prepaid card products, Visa Direct, Visa B2B Connect, Visa Cross-Border Solution, and Visa DPS. It reported solid third-quarter financial results with quarterly net revenue of $8.90 billion, indicating an increase of 9.9% from the prior year’s quarter.
With digital technologies, modes of payment and transactions have also evolved, including digital payments and cashless transactions. Total transaction value in the digital payments market is expected to reach $11.53 trillion in 2024 worldwide, whereas, in the United States, the transaction value is projected to reach $3.07 trillion and further grow at a CAGR of 10.7% to hit around $4.62 trillion by 2028.
Visa is efficiently leading this fast-paced development with its newly launched innovative product solutions and strategic partnership with industry leaders. Visa relaunched Visa SavingsEdge, aimed at delivering greater value to small businesses across the US and Canada. It announced a suite of new products and services for the Asia Pacific region and entered into technological collaboration with HSBC and Amazon.
On July 23, Visa’s board of directors declared a quarterly cash dividend of $0.52 per share of class A common stock paid on September 3, 2024, to all holders of record as of August 9, 2024. It also repurchased 17.2 million shares of class A common stock at an average cost of $276.75 per share for $4.8 billion. At the end of the quarter, V had $18.9 billion as remaining authorized funds for share repurchases.
The company’s payments volume increased 7%, while cross-border volume rose 14%, and processed transactions up 10%.
Ryan McInerney, Chief Executive Officer, Visa, commented, “During the quarter, we expanded our partnerships with many clients around the world and announced several innovations that will help drive the future of commerce."
Shares of V have surged 10% over the past month and 15.5% over the past year to close its last trading session at $285.61.
Let’s look at factors that could influence V’s performance in the upcoming months.
Positive Recent Developments
On July 9, V and HSBC announced a technological collaboration to launch Zing, HSBC’s international money app that allows users to hold, send, and transact in multiple currencies. Zing leverages V’s technology for features like low-cost currency exchange and real-time payments and empowers UK members with international money needs.
On June 27, V announced a collaboration with Amazon to offer Canadian consumers installment payment options to eligible RBC and Scotiabank credit card holders. The convenient payment feature allows customers to convert their Amazon purchases into smaller, fixed payments over time.
Also, on June 13, V relaunched Visa SavingsEdge to deliver greater value to small businesses across the US and Canada. With the latest enhancements, Visa SavingsEdge has introduced a more dynamic platform with new offerings and features designed to support smarter spending and saving.
Robust Financials
During the third quarter that ended on June 30, 2024, V’s net revenue increased 9.9% year-over-year to $8.90 billion. The company’s operating income grew 18.2% from the year-ago value to $5.94 billion. V’s income before income taxes of $5.99 billion indicates growth of 16.4% year-over-year.
Further, the company’s non-GAAP net income and non-GAAP EPS amounted to $4.91 billion and $2.42, up 9.1% and 12% from the prior year’s quarter, respectively.
Also, as of June 30, 2024, the company’s total assets stood at $91.04 billion, up from total assets of $90.50 billion as of September 30, 2023.
Solid Historical Growth
V’s revenue and EBITDA have grown at respective CAGRs of 15.5% and 16.4% over the past three years. The company’s EBIT has increased at a CAGR of 16.8% over the same timeframe, while its net income and EPS have improved at CAGRs of 20.7% and 23.6%, respectively.
Furthermore, the company’s total assets and levered free cash flow have improved at respective CAGRs of 3.3% and 13.6% over the past three years.
Favorable Analyst Estimates
Analysts expect V’s revenue for the fourth quarter (ending September 2024) to grow 10.1% year-over-year to $9.48 billion. The consensus EPS estimate of $2.58 for the same period indicates a 10.6% year-over-year improvement. Also, V has an impressive earnings surprise history, having topped consensus EPS estimates in each of the trailing four quarters.
For the fiscal year ending September 2024, the company’s revenue and EPS are expected to grow 9.6% and 13.1% year-over-year to $35.80 billion and $9.92, respectively. Additionally, Street expects its revenue and EPS for the fiscal year 2025 to increase 9.9% and 11.6% year-over-year to $39.34 billion and $11.07, respectively.
High Profitability
V’s trailing-12-month gross profit margin and EBITDA margin of 97.80% and 69.83% are 61.6% and 210.2% higher than the respective industry averages of 60.51% and 22.51%. Its trailing-12-month net income margin of 54.72% is considerably higher than the industry average of 22.43%. Similarly, the stock’s trailing-12-month levered FCF margin of 42.09% is 135.5% higher than the industry average of 17.87%.
Furthermore, V’s trailing-12-month ROCE, ROTC, and ROTA of 49.85%, 24.38%, and 20.99% are favorably compared to the industry averages of 10.32%, 6.91%, and 1.05%, respectively.
POWR Ratings Reflect Promise
V’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. V has a B grade for Quality, in sync with its higher-than-industry profitability.
Furthermore, the stock also has a B grade for Stability, in sync with its beta of 0.89.
V is ranked #12 in the 47-stock Consumer Financial Services industry.
Beyond what I have stated above, we have also given V grades for Sentiment, Value, Momentum, and Growth. Get access to all the V Ratings here.
Bottom Line
Visa is a leading payment technology company that is maintaining its leadership position with innovative solutions and technological collaborations and rebranding its product offerings. Also, the company's long-term prospects are fueled by its robust growth trajectory, broadening operations, and strong financial performance.
Given V’s outstanding financials, accelerating profitability, reliable dividends, and promising growth outlook, V could be an ideal buy for solid returns.
How Does Visa Inc. (V) Stack Up Against Its Peers?
While V has an overall POWR Rating of B, investors could also check out these other stocks within the Consumer Financial Services industry with A (Strong Buy) or B (Buy) ratings: Regional Management Corp. (RM), Atlanticus Holdings Corporation (ATLC), and INNOVATE Corp. (VATE).
For exploring more A and B-rated consumer financial stocks, click here.
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V shares were unchanged in premarket trading Tuesday. Year-to-date, V has gained 10.33%, versus a 15.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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