Shorts Should Be Wary Of Earnings-Driven After-Hours Declines For Visa, Longs Offered The Better Trade

Jul.25.12 | About: Visa Inc. (V)

Visa (V) is due to report its fiscal Q3 results in tonight's after-hours session. Analysts polled by Capital IQ expect the company to report a profit of $1.45 per share on revenue of $2.52 billion.

Visa has demonstrated a tendency to see its earnings-driven after-hours moves post sharp reversals in next-day regular session trade.

In the handful of quarterly reports we've tracked, the stock has reversed direction between the sessions in 12 of 17 events, or 71% of the time.

Looking deeper into the performance data, Visa has recorded an earnings-driven after-hours decline in 10 quarters we've tracked, reversing direction the following day in eight of those events, or 80% of the time. With this kind of consistency on the downside, longs should be watching any negative moves to gain insight into where potential floor supports could form.

On the plus-side, Visa has recorded and earnings-driven after-hours gain in seven quarters, and it has narrowed its evening performance the following day in four of those events, or 57% of the time.

  • On May 2, 2012, Visa declined 2.9% in after-hours trade despite topping Q2 estimates. The stock added to its downside the next day, closing the May 3 regular session off 4.7%.
  • On Feb. 8, 2012, Visa advanced 3% in night trade on the back of better-than-expected Q1 results. The stock edged higher the next day, closing with a 3.7% gain on Feb. 9.
  • On Oct. 26, 2011, Visa declined 1.8% in evening trade after posting mixed Q4 results, hiking its stock buyback, and reaffirming its outlook. The stock reversed direction the next day, closing the Oct. 27 regular session up 2.6%
  • On July 27, 2011, Visa edged up 0.3% in night trade after beating Q3 earnings estimates, meeting on revenue, and setting a $1 billion stock buyback. The issue saw its upside evaporate the next day, closing the July 28 regular session down 0.9%.
  • On May 5, 2011, the stock fell 1.3% after a narrow earnings beat. Shares rebounded to post a 0.9% gain the next day.
  • On Feb. 2, 2011, Visa slipped 0.8% in after-hours trade after beating Q1 earnings estimates and meeting on revenue. The stock narrowed its downside the following day, closing the Feb. 3 regular session off 0.6%.
  • On Oct. 27, 2010, Visa shares declined 2.2% in evening trade despite an earnings beat, and announcing a raised dividend and a share buyback plan. The stock added to its downside the following day, closing the Oct. 28 regular session off 4.3%.
  • On July 28, 2010, the stock edged up 0.2% after earnings comparable to the year-ago quarter and firmer revenue. Shares fell 4.2% the next day.
  • On April 28, 2010, the stock fell 1.4% during extended-hours trading despite a Q2 beat. Shares fell a smaller 0.8% the next day.
  • On Feb. 3, 2010, the stock gained 2.9% in night trade after a Q1 beat. Shares fell 0.5% the next day.
  • On Oct. 27, 2009, the stock was up 2.5% during evening trading after a Q4 beat and announced share buyback. The stock rose by a stronger 3.6% the next day.
  • On July 29, 2009, Visa slipped 0.9% in after-hours trade after posting better-than-expected Q3 earnings but offering mixed guidance. The stock rebounded in the following day's regular session, ending up 1.1% on July 30.
  • On April 29, 2009, the stock slipped 0.7% despite a Q2 beat. Shares rebounded to gain 2.2% the next day.
  • On Feb. 4, 2009, the stock gained 7.7% after a Q1 beat. Shares were up a stronger 9.3% the next day.
  • On Oct. 29, 2008, Visa slipped 0.5% in after-hours trade despite beating Wall Street's estimates. The stock found firmer footing the next day, rising 7% by the closing bell on Oct. 30.
  • On July 30, 2008, Visa advanced 1.3% in after-hours trade after reporting better-than-expected earnings and sales results. The modest advance was washed out the next day as Visa tumbled 6.9% by the closing bell on July 31.
  • On April 28, 2008, Visa was hit for 6.1% decline in night trade despite beating Q2 expectations. Buyers flocked to the stock the next day and lifted it firmly into the green, closing out the April 29 regular session with a 6.9% gain.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.