Visa (NYSE: V) is scheduled to report its fiscal Q3 2021 results on Tuesday, July 27 (after market closes). We expect Visa to beat the consensus estimates for revenues and earnings. The payment processing giant reported better than expected results in the last quarter. But, its revenues declined on a year-on-year basis, mainly due to lower cross-border-transaction volumes. That said, its payment volumes and the number of processed transactions have seen some recovery in the quarter. We expect the same trend to drive the third-quarter FY2021 results as well (FY Oct-Sept).
Our forecast indicates that Visa’s valuation is around $262 per share, which is 5% above the current market price of around $249. Look at our interactive dashboard analysis on Visa’s pre-earnings: What To Expect in Q3? for more details.
(1) Revenues expected to beat the consensus estimates in Q3
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Trefis estimates Visa’s fiscal Q3 2021 revenues to be around $5.97 billion, 2% above the $5.85 billion consensus estimate. The company reported $21.8 billion in revenues in 2020 – down 5% y-o-y. This was mainly due to lower cross-border transaction volumes, followed by slower growth in payments volume and processed transactions. While the cross-border transaction volumes suffered due to Covid-19 related international travel restrictions, the payments volume and processed transactions growth rate were down due to a decline in consumer spending levels. Further, the cross-border volumes continued to suffer in the second quarter of 2021 as well, as travel restrictions were still in place. It resulted in a 19% y-o-y drop in international transaction revenues. That said, both payment volumes and the number of processed transactions increased in the quarter, as compared to the year-ago period, due to some recovery in the consumer spending levels. This led to an 8% y-o-y growth in the services segment, and an 11% increase in data processing revenues respectively. We expect the same trend to govern the third quarter FY2021 results.
Moving forward, we expect the cross-border transaction volumes to improve over the coming months, as travel restrictions are likely to be relaxed due to the accelerated rate of the Covid-19 vaccination program. Further, the payment volumes and the number of processed transactions are likely to continue their growth trajectory. Overall, it will likely enable Visa’s revenues to touch $23.4 billion in FY2021. Our dashboard on Visa’s revenues offers more details on the company’s segments.
2) EPS likely to edge pass the consensus estimates
Visa’s Q3 2021 adjusted earnings per share (EPS) is expected to be $1.36 per Trefis analysis, marginally above the consensus estimate of $1.34. Its profitability figures improved in the second quarter of 2021 due to a slight increase in its operating expenses as a % of net revenues –from 33% to 37.5%. We expect the same trend to continue in the FY2021 Q3 results.
The net interest margin is unlikely to see some improvement in FY2021, as compared to the 2020 levels. Further, the adjusted net income is likely to grow by 9% y-o-y to $11.9 billion. This will enable the company to report an EPS of around $5.45 in the year.
(3) Stock price estimate 5% more than the current market price
Going by our Visa’s valuation, with an EPS estimate of around $5.45 and a P/E multiple of close to 48x in fiscal 2021, this translates into a price of $262, which is 5% above the current market price of around $249.
Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year
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