Visa Earnings: Payment Volumes, Transactions Offset FX Headwinds
Visa (NYSE:V) reported its fiscal first quarter earnings on Thursday, April 30. The company reported net income of $1.55 billion, about flat on an year-over-year basis. [1] However, the company’s net operating revenue increased by 10% year over year on a constant dollar basis to $3.4 billion. The increase in revenue was primarily driven by growth in payment volume, transactions processed and cross border transactions in both the domestic and international market. However, FX headwinds continued to hamper the growth from the international market in the quarter. [2]
The company projects revenue to grow at 6-7% on a nominal basis in the next quarter and then accelerate to a double digit growth rate in the subsequent quarter.
We have a price estimate of $68 for Visa’s stock, which is slightly higher than the current market price.
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Growth in Payment Volume and Transactions
Visa’s payment volume grew year-over-year by 11% to $1.2 trillion on a constant dollar basis. However, in nominal dollars, it grew by just 8%. The payment volume in the U.S. grew by 9% and outside of the U.S. it grew by 13%. This was consistent with payment volume at the end of the prior quarter. The continued strengthening of the U.S. dollar slowed growth in the international markets including Asia, Russia, Canada and Latin America.
The company also witnessed an increase in its cross-border volume, which saw year-over-year growth of 8%, with a U.S. and international growth rate of 6% and 10% respectively, on a constant dollar basis. Cross-border volumes also faced significant currency headwinds.
The total number of processed transactions – which includes Visa, Visa Electron, Interlink and PLUS cards on the Visa network – also grew year-over-year by 11% to $17 billion in the last quarter backed by increased consumer spending. Transactions processed grew 9% in the U.S. and 14% in the international market. Visa estimates that additional savings created by falling gas prices is likely to translate to higher consumer spending after 6-9 months.
Consistent Focus on Building Digital Payment Platform
Visa continues to expand its digital platform. Visa Checkout, a digital payment service, has around 4 million registered users and over $46 billion in payment volume. Visa has been consistently adding new merchants to improve the acceptance of Visa Checkout. Within the mobile payment space, the company expects further volume growth through Apple Pay. It also announced a partnership with Samsung Pay, which is likely to launch in September 2015. Visa is likely to benefit from mobile payment technology through increased payment volume and transactions.
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