Visa Inc. V is set to report its first-quarter fiscal 2025 results on Jan. 30, 2024, after market close. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at $2.66 per share on revenues of $9.34 billion.

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The estimate for fiscal first-quarter earnings has been revised downward by 1 cent over the past 60 days. However, the bottom-line projection indicates a year-over-year increase of 10.4%. The Zacks Consensus Estimate for quarterly revenues suggests year-over-year growth of 8.2%.

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For fiscal 2025, the Zacks Consensus Estimate for Visa’s revenues is pegged at $39.33 billion, implying a rise of 9.5% year over year. The consensus mark for EPS is pegged at $11.19, predicting a jump of around 11.3% on a year-over-year basis.

The payments juggernaut has a robust history of surpassing earnings estimates. It beat estimates in each of the last four quarters, with the average being 3%???. This is depicted in the graph below:

Q1 Earnings Whispers for Visa

Our proven model predicts a likely earnings beat for Visa this time around as well. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat. That’s precisely the case here.

Visa has an Earnings ESP of +0.09% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Shaping Visa’s Q1 Results

The growing adoption and popularity of digital payment methods are likely to contribute positively to Visa's overall fiscal first quarter results. The Zacks Consensus Estimate suggests a 5.3% increase in total Gross Dollar Volume from the previous year, while our model predicts 5.8% growth.

As the company draws revenues as a set percentage of total transaction value every time a customer makes payments with a debit/credit card, higher spending means more revenues in the form of transaction processing fees. The Zacks Consensus Estimate for fiscal first-quarter total processed transactions indicates 9.8% year-over-year growth, whereas our model predicts a 10% increase.

The consensus mark for total payment volumes indicates a 6.7% year-over-year increase, in line with our model estimate. We expect the metric for U.S. operations alone to jump more than 5% year over year. Similarly, our model predicts 11.6% and 15.5% year-over-year growth in Latin America and CEMEA, respectively.

The Zacks Consensus Estimate for data processing revenues indicates 9.9% growth in the fiscal first quarter from the year-ago level of $4.4 billion, while our estimate suggests an 8.8% increase. Similarly, the consensus mark for service revenues suggests 8% year-over-year growth, whereas we expect the metric to grow by 8.4%.

Furthermore, the consensus estimate for international transaction revenues indicates more than 12% growth from a year ago, whereas our model predicts a 13.2% increase. Continuous growth in cross-border volumes is expected to have supported the metric.

The factors stated above are expected to have positioned Visa for strong year-over-year growth and an earnings beat in the fiscal first quarter. However, rising expenses and client incentives (a contra-revenue item) are likely to have partially offset the positive impact of higher volumes.

We expect adjusted total operating expenses for the quarter under review to increase more than 10% year over year due to increased Personnel, Marketing, Professional Fees and Network and Processing expenses. Also, both the Zacks Consensus Estimate and our model estimate for client incentives suggest that the metric will be around $3.9 billion in the fiscal first quarter.

Visa Price Performance & Valuation

Visa's stock has exhibited an upward movement over the past year. However, its gain of 20.8% has underperformed the industry’s growth of 24%. In comparison, its peers like Mastercard Incorporated MA and American Express Company AXP have gained 21.8% and 75.4%, respectively, during this time. Additionally, Visa has lagged the S&P 500, which has gained 26.1% during the same period.

Price Performance – V, MA, AXP, Industry & S&P 500

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Now, let’s look at the value Visa offers investors at current levels.

The company’s valuation looks somewhat stretched compared with the industry average. Currently, Visa is trading at 28.15X forward 12-months earnings, above its five-year median of 26.85X and the industry’s average of 25.19X.

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In comparison, Mastercard is even less attractively valued, trading at 32.57X forward 12-months earnings. American Express, on the other hand, is trading at 21.20X, offering a better value at the moment.

How Should You Play Visa Ahead of Q1 Earnings?

Visa is leveraging the ongoing surge in e-commerce and strong demand for digital payment solutions to maintain its growth trajectory. With a massive global network, solid financials, increasing transaction volumes, and a focus on innovation, Visa is well-positioned for long-term success. Unlike some peers involved in lending, Visa's core strategy revolves around payment facilitation, which shields the company from risks like loan losses or credit delinquencies during economic downturns.

The company's continuous growth in cross-border payment volumes highlights untapped opportunities in emerging markets, where many individuals remain underbanked. This presents substantial international growth potential. Backed by robust operating cash flow, Visa is well-equipped to drive growth through organic expansion and strategic acquisitions. Its commitment to technological innovation further enhances its competitive edge, ensuring a strong position in the rapidly evolving financial ecosystem.

Consumer spending is expected to remain strong, potentially supported by economic policies under President Donald Trump, which could boost consumer confidence. However, Visa also faces challenges, including regulatory pressures, ongoing lawsuits in domestic and international markets, and the Credit Card Competition Act of 2023, which could impact its profit margins. While Trump is likely to promote business-friendly policies, the evolving regulatory landscape remains a factor to watch.

Although Visa's long-term growth prospects remain promising, this might not be the best time to buy. Current shareholders can hold their positions and benefit from the company’s growth initiatives. However, potential investors may want to wait for a more favorable entry point, considering valuation concerns limiting near-term gains, and keep an eye on legal uncertainties and the upcoming earnings results.

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