Visa Inc. shares gained in afternoon trading on Thursday after the company beat earnings expectations and delivered a forecast that an analyst said showed "fundamental strength" throughout the business.
The payment giant ended its fiscal year with adjusted earnings per share of $ 1.47 for the fourth quarter, up from $ 1.21 a year earlier and ahead of $ 1.43 that analysts surveyed by FactSet had predicted. Revenues rose to $ 6.1 billion from $ 5.4 billion, matching the FactSet consensus of $ 6.1 billion.
For the financial year ahead, Visa
V, + 2.83%
expects low double digit revenue growth and a negative effect of 1
The outlook served as "the real bright spot," wrote Baird analyst David Koning. Keefe, Bruyette and Woods analyst Sanjay Sakhrani said he "stepped away from the conference collection and felt that underlying volume growth remains intact and the layout for next year (and beyond) is positive."
Visa spent time on the revenue talks going through the various forecasts for the forecast, including an expected increase in client incentives, which Visa pays to partners to direct more payment volume through the platform.
The company said it will have renewed one-third of its volume over the three quarters, ranging from the just completed fourth quarter of fiscal 2019 to the second quarter of fiscal 2020, which CFO Vasant Prabhu called "a unique level of renewal activity" when the company saw some opportunities for early renewal with customers like Chase in addition to planned renewals. These renewals are driving the expected incentive growth, and Visa projects that it will feel the full effects of this quarter.
In terms of positive impetus for Visa's economy, the company expects to continue to take advantage of pricing measures in fiscal 2019 as well as some new pricing features in 2020 that should be smaller in magnitude.
Visa also highlighted some events that may help support revenue and volume growth, including the Tokyo Olympics in the summer of 2020. Japan is primarily a cash-driven country, but the government uses the Olympics as a way to conduct payment digitization and is rolling out infrastructure to support this effort. Visa is a long-time sponsor of the Olympics and will again have a large presence on the games.
"It's very exciting when a government decides to use the Olympics to go against the cashless," Prabhu told MarketWatch.
Prabhu also talked about Visa's positioning in Europe more than three years after the agreement with Visa Europe was terminated. He sees "many opportunities to grow" in markets such as Germany, Spain and Italy, as well as a general chance of improving credit penetration in Europe, as the debit is still prominent. "The acquisition has not been a home run for us," he said, pointing to the double-digit accretion.
Stocks have gained 34% so far this year, such as the Dow Jones Industrial Average
has risen 15%.