Visa Reaffirms Full Year Net Revenue Expectations Despite A Drop In Payments Volume

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Visa (NYSE:V) released its second quarter results on April 24, with net revenues remaining flat sequentially at $5.5 billion. The company’s EPS came in at $1.31, growing by 17% over the prior year quarter and remaining flat sequentially. Visa has been consistently beating street estimates for the past four quarters, supported by growing payments volume. In 2018, Visa’s payments volume increased by 11% to $8.06 trillion, and supported net revenue growth of over 12%.

You can view our interactive dashboard on How Has Visa Fared In Recent Quarters? to observe quarterly revenue trends and modify key revenue drivers to gauge the impact on the stock price, and see more of our financial services company data here.

Key Revenue Drivers

  • Data Processing Revenues (Transaction Fees) decreased by 1.5% sequentially to $2.4 billion this quarter, and have been reporting consistent growth along with payments volume and processed transactions in the last few quarters. Payments volume and processed transactions dropped sequentially by 4% to $2.08 trillion and 32.5 billion, respectively.
  • Service Revenues (Assessment Fees) increased by 3.2% sequentially to $2.41 billion this quarter, driven by 4% growth in payments volume in the previous quarter (recognized on the payments volume of the previous quarter). The assessment fee is charged to banks and financial institutions for their participation in the Visa network on the basis of the total processed transaction value.
  • International Transaction Revenues decreased sequentially by 3% to $1.8 billion this quarter, facing headwinds from exchange rates and currency volatility. Cross-border volumes decreased by 2% on a nominal basis this quarter. International transaction revenues contribute around 35% of net revenues and are integral to the company’s future growth. With the revenues contracting sequentially over the past two quarters, this could possibly become a top line headwind for the full year.
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Central Europe, Middle East, Africa, and the United States observed strong growth in payments volume over the prior year period. Growth in Asia-Pacific and Canada remained about flat, with a slight decline in Latin America and Western Europe. Strong growth in the United States could be a sign of recovering retail sales as the U.S. Census Bureau data reported stagnant retail and food services sales in the first two months.

The operating expenses increased by 7% over the prior year quarter, driven by personnel and administrative costs. Operating expenses as a percentage of net revenues remained flat at 34% over the prior year quarter, and the company’s management has maintained the outlook for a single-digit decrease in operating expenses for the full year. With the first two quarter’s operating expenses nearly 47% of the previous year total, we expect Visa to deliver on its expense management targets.

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