Visa Inc. invited to flexible spending as it posted higher profits last quarter, but its shares were still under pressure in Thursday's post-market action.
The culprit? US trading volumes slowed in January, according to analysts.
Dan Dolev, a Mizuho analyst, noted that Visa V,
U.S. payment volumes slowed in the first quarter of the fiscal year and in the first three weeks of January, a trend driven by debit transactions.
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Although the slowdown in U.S. trading volumes and total transactions processed in January was “not a huge surprise,” these trends could cause the stock to “tumble slightly tomorrow,” Baird analyst David Callow said.
January trends in the U.S. reflect one-time factors that are not indicative of broader spending issues, said Chris Soh, Visa's chief financial officer. For example, areas like Kansas City and Dallas experienced extremely cold temperatures that prevented people from going out and spending.
“We've seen weather-related patterns before,” he said. “It's not of great concern to us.”
As for volume trends in the December quarter, he said the slowdown was a matter of timing.
“Taking it all together, the roughly 80 basis points decline in total U.S. payments volume growth from Q4 to Q1 was primarily due to a less favorable mix of weekends and weekdays,” he said on Visa's earnings call.
“Consumer spending across all sectors, from low to high spending, has remained relatively stable,” he continued. “Our data does not indicate any meaningful change in behavior across consumer segments.”
However, investors still appeared concerned, and shares were down nearly 3% in after-hours trading on Thursday.
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In the fiscal first quarter, Visa reported net income of $4.9 billion, or $2.39 per share, compared to net income of $4.2 billion, or $1.99 per share, in the same period a year earlier. After adjustments, Visa earned $2.41 per share, beating the FactSet consensus view, which was $2.34 per share.
Revenue rose to $8.63 billion from $7.94 billion, while analysts were looking for $8.56 billion.
The company saw an 8% increase in payment volume during the last quarter, while processed transactions rose 9%.
Soh said consumer spending was “resilient” and “quite stable”.
The company saw a 16% increase in the volume of cross-border transactions, which occur when someone makes a purchase from a merchant based in a different country. Cross-border volume is usually viewed as an indicator of international travel, although it also includes international e-commerce purchases.
“Travel continues to be a tailwind” and is “quite healthy,” Soh told MarketWatch.
For the fiscal second quarter, Visa expects net revenue to grow at an “upper average” to high single-digit rate. The company also expects earnings per share to grow at a “high” rate compared to the previous year.
The company is sticking to its full-year forecast, which calls for low-double-digit revenue growth on an adjusted constant dollar basis.
Fiscal 2024 could be “a bit of a mirror image of 2023, in the sense that our revenue growth rate in the first half, even if the fundamentals are very stable… will just be compressed due to the higher comparison to a year ago, and we see that,” Soh told MarketWatch. “There are many reasons why growth rates in the second half of the year will accelerate.”
He said the company faces easier comparisons in the second half of the year, and management expects to see positive trends in average ticket sizes.
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