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Visa Beats on Results. Shares Rise.Visa delivered top- and bottom-line beats for its latest quarter on Tuesday evening, sending shares 2% higher in after-hours trading. A continued post-pandemic rebound in international travel means consumers are swiping more abroad, boosting results. Visa (ticker: V) reported $8.0 billion in revenue in the first three months of 2023, which corresponds to the payment-processing giant's fiscal second quarter. That was up 11% from a year earlier and topped Wall Street analysts' average estimate of $7.8 billion, according to FactSet. Net income was $4.3 billion, about $100 million better than consensus, and good for a whopping net profit margin of nearly 54% in the period. Quarterly earnings per share rose 17% year over year, to $2.09, beating the $1.99 average forecast. Visa said that payments volume rose 10% from the same quarter a year earlier, much better than the 6% forecast by analysts. More lucrative cross-border transaction volumes rose even faster, at 24%. That was helped by an easy comparison to the year-ago period, which was more affected by the pandemic. Visa recognizes revenue on payments processed during the prior quarter, so the volume growth in the fiscal second quarter suggests a strong period to come. Payments volume growth was 7% in the last three months of 2022, or Visa's fiscal first quarter, driving the reported quarter's results. "Visa's strong fiscal second quarter performance reflects continued focus on our growth levers—consumer payments, new flows, and value-added services," said Visa's newly installed CEO Ryan McInerney in a statement on Tuesday. "…While there is macroeconomic uncertainty, I feel confident in Visa's ability to manage through changing environments." Visa's free cash flow was $3.7 billion in the quarter, less than the $4.1 billion expected by Wall Street but up 13% from a year earlier. The company spent a combined $3.2 billion on share buybacks and dividends in the first three months of 2023. The results demonstrate Visa's ability to deliver steady growth almost no matter the environment. The outlook is hazy for many companies and industries, and some are already feeling some impact from a slowing economy or tighter financial conditions. Visa looks like a port in the storm of an uncertain earnings season. The results will be of interest to investors on the lookout for potential signs of a recession on the horizon. Visa management may comment on how retail spending is progressing and what they expect to come next, given their real-time view of consumer behavior around the globe. Payment processing is arguably the best big business out there, with wide margins and steady growth through economic cycles—driven by spending moving from cash to plastic and online, especially in emerging markets. It has economies of scale, and earnings tend to grow faster than revenue. There's even built-in inflation protection: the business model is a percentage of each transaction processed. Those attributes have earned Visa and rival Mastercard (MA)—which reports on Thursday—premium valuation multiples. Visa stock trades for 26 times forecast earnings over the coming year and Mastercard goes for 29 times currently. Those compare with the S&P 500's 18 times. Visa stock is up 12% so far this year, versus a rise of about 8% in the S&P 500 and Mastercard stock. American Express (AXP), which reported on April 20 , has returned 10% including dividends in 2023. |
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