Earnings Preview: Visa Q3 2014

Jul.23.14 | About: Visa Inc. (V)

Summary

Visa, Inc. is slated to report 3Q 2014 earnings after the bell on Thursday, July 24th.

Adjusted Earnings Per Share: The current Street estimate is $2.10 with a range of $1.99 to $2.17.

Revenues: Analysts expect an increase of 5.0% y/y to $3.15 bln (range $3.05 bln to $3.22 bln).

By Craig Bowles

Overview

Visa, Inc. (NYSE:V) is slated to report 3Q 2014 earnings after the bell on Thursday, July 24th. The earnings release is expected at approximately 4:00 p.m. EST with a conference call to follow at 5:00 p.m. that is webcast through Visa Investor Relations. A member of the Dow Jones Industrial Average, Visa has significant market influence and the potential to impact the broader market gauges.

Outliers & Strategy

Key measures:

  • Adjusted Earnings Per Share: The current Street estimate is $2.10 with a range of $1.99 to $2.17. Consensus was $2.19 three months ago. (Source: Yahoo! Finance). A GAAP number will be the comparable value if no adjusted EPS.
  • Revenues: Analysts expect an increase of 5.0% y/y to $3.15 bln (range $3.05 bln to $3.22 bln).
  • In terms of guidance, the company guidance is to average EPS growth in the mid to high teens during 2014 and to grow revenues in the 10-11% range.
  • Price/Book of 5.1 compares to the industry's 3.1 and 5-yr average 3.3; Price/Earnings of 26.2 compares to the industry's 17.7 and 5-yr average of 29.1.
  • Visa Inc. and MasterCard Inc. (NYSE:MA) resolved the dispute with Russia back in May but global tensions could create more issues.
  • Insiders have sold 73,001 shares during the last three months and 312,826 shares over the past year. The company approved a $5 bln buyback in October, up from the 1.5 bln a year earlier. Visa bought back a little more than $1.1 billion worth of its shares through the first three months of 2014.
  • Visa is compared to other credit card and financial companies with quarterly results possibly impacting MasterCard, American Express (NYSE:AXP), Discover Financial (NYSE:DFS) Citigroup (NYSE:C) and JPMorgan Chase (NYSE:JPM).
  • Visa shares have a 1-day average price change on earnings of 3.36%. Options imply a 2.81% move.

Recent News

  • 07/23: Visa has 16 Buy ratings, 2 Holds, and 0 Sell ratings. Consensus price target is $244.90, according to a post on analystratings.net.
  • 07/22: Visa has seen the number of CyberSource transactions nearly triple to 3.8 billion, according to a post on Fool.com.
  • 07/11: V.me, like PayPal, is a digital wallet service which allows individuals to simply and securely type in their username and password to pay for goods online without ever having to type in their credit card number, address, or any other information, according to a post on Fool.com.
  • 06/20: Visa is gaining strength fundamentally but intense competition and regulatory challenges continue to restrict desired growth, according to a post by Zacks.com.
  • 06/18: Russia will reportedly lower the requirements of Visa and MasterCard needed to continue operating in the country, according to a post by Foxbusiness.com.
  • Apple (NASDAQ:AAPL) has potential to use its success in fingerprint technology and its giant user-base to disrupt the $500 billion credit card business dominated by duopolists MasterCard and Visa, according to a post by Forbes.com.

Technical Review

Visa's stock outperformed MasterCard during the 2008/09 recession but lagged since mid-2010. Since mid-2013, MasterCard has shown more recent relative strength. Visa's steady uptrend since 2010 had its biggest pullback in 2014, but only briefly tested the 200-day moving average. Above $227.50 would move the stock above the February/March balance area. Below $207.50 would increase worries that this long, steady uptrend may have ended. (Chart courtesy of StockCharts.com)

Summary

Visa has beaten or matched estimates in each of the last four releases but with varied market reactions. Earnings probably need to come in close to the consensus from three months ago of $2.19 with revenue closer to $3.2 bln to support the stock's push into an area that met resistance earlier this year.

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Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.