Visa beats expectations on higher traffic volume
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Visa beats expectations on higher traffic volume

Payments giant Visa, long the king of cashless transactions, reported earnings last Wednesday that beat analysts’ predictions thanks to an incredibly busy holiday season. Visa, of course, is not the only payments giant to benefit from this trend (see another story in today’s newsfeed, for example) and a December 26 report by Mastercard said that the US recorded its strongest holiday season in six years! Renewed strength in the world’s largest economy saw American’s spend 5.1% more than they did over the holidays in 2017, to more-than $850 billion.

Visa’s share price has appreciated by 3% so far this year

graph 04 visa

Source: Yahoo Finance

Visa’s total payments volume, and the number of transactions processed (two of the most fundamental metrics for ascertaining the health of its underlying business) both shot up by 11%. This fuelled an outperformance in earnings and revenue. The former beat the Street, coming in at $1.30 (against expectations of $1.25) while the latter rose 13.24% year on year to $5.51 over the three-month period.

Higher payment values did come at a cost, though, as Visa’s operating expenditure rose by 16.5% to $1.79 billion – a reflection of the price you pay to partner with consumer brands, payment processors, hotels, airports, and more. Visa is not alone in higher spending over the quarter, as Mastercard is telling a similar story. In both cases, the companies are looking to spend now in return for major, on-going, growth benefits.

The company’s CEO, Al Kelly, took the opportunity to discuss US politics – which he sees as a major threat to consumer confidence – on Visa’s earnings call. However, the overall message was that wobbles in global sentiment had not affected Visa adversely. He said:

I was glad to see the reopening of the U.S. government last Friday after 35 days. It’s critical that a deal gets done in this three-week period as I fear a second shutdown would have a further negative impact on consumer confidence and in turn on the U.S economy. Despite all the uncertainty across the globe and the recent cross border slowdown, our business performed well this quarter and we remain confident in our business performance over the medium to long term.”

Disclosure

Dominion holds Visa in its Global Trends Ecommerce Fund.


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