A leading payments technology company (V) reported solid financial results for the fiscal fourth quarter as it continued to capitalize on strong consumer spending trends despite the macroeconomic challenges. It has primarily benefited from a significant global shift to cashless payments and a rebound in cross-border travel. 

The company’s fiscal fourth-quarter 2022 net revenues increased 19% year-over-year to $7.80 billion. Its non-GAAP net income and EPS came in at $4.10 billion and $1.93, up 16% and 19% year-over-year.

The company’s payments volume for the three months ended September 30, 2022, increased 10% year-over-year on a constant-dollar basis, while total cross-border volume grew 36% year-over-year. In addition, its processed transactions increased by 12% from the prior-year period.

Concurrent with its robust financials, the payments processing company returned $2.90 billion and $14.80 billion of capital to shareholders for the fiscal fourth quarter and full year, respectively, in the form of share repurchases and dividends. Moreover, the company raised its quarterly cash dividend by 20% to $0.45 per share and authorized a new share repurchase program of $12 billion.

V pays $1.80 as dividends annually, yielding 0.87% on the current share price. Its four-year dividend yield is 0.61%. Its dividend payouts have grown at a CAGR of 14.5% over the past three years and 18% over the past five years. The company has raised its dividend for 14 consecutive years.

Shares of V have gained 11.7% over the past month to close the last trading session at $209.99.

Here is what could influence V’s performance in the upcoming months:

Recent Positive Developments

On November 14, V and Royal Bank of Canada (RBC) announced their new collaboration to expand flexible financing options in Canada with installment plans. This announcement responds to increasing consumer demand for affordable and more convenient financing solutions, including installment payments and Buy Now Pay Later (BNPL) options in Canada and globally.

In October, the company partnered with Thunes to help individuals and small businesses move money internationally to 78 digital wallet providers, reaching 1.5 billion digital wallets across 44 countries and territories. The partnership is expected to expand Visa Direct’s reach to more than 7 billion endpoints, including nearly 3 billion cards, 2 billion accounts, and 1.5 billion digital wallets.

Robust Financials

V’s net revenues increased 19% year-over-year to $7.80 billion in the fiscal 2022 fourth quarter ended September 30, 2022. Its operating income grew 17.9% from the year-ago value to $5.09 billion. The company’s non-GAAP net income and earnings per share came in at $4.10 billion and $1.93, up 16% and 19% year-over-year, respectively.

For the twelve months ended September 30, 2022, cash inflows from operating activities came in at $18.85 billion, up 23.8% year-over-year.

Favorable Analyst Estimates

Analysts expect V’s revenue for the fiscal 2023 first quarter (ending December 31, 2022) to come in at $7.68 billion, representing an increase of 8.8% year-over-year. The consensus EPS estimate of $2 for the ongoing quarter indicates a 10.5% year-over-year increase. It’s no surprise that the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

In addition, V’s revenue and EPS for the fiscal year 2023 (ending September 30) are expected to rise 8.9% and 10.6% year-over-year to $31.92 billion and $8.29, respectively. Also, analysts expect the company’s revenue and EPS for the next year to grow 12.2% and 16.3% year-over-year to $35.82 billion and $9.65, respectively.

High Profitability

V’s trailing-12-month gross profit margin of 98.47% is 94.8% higher than the 50.04% industry average. Its trailing-12-month EBITDA margin of 70.09% is 481.8% higher than the 12.05% industry average. Likewise, the stock’s trailing-12-month net income of 51.03% is 1,295% higher than the industry average of 3.66%.

Furthermore, V’s trailing-12-month levered FCF margin of 47.20% is 530.2% higher than the 7.49% industry average. Its trailing-12-month ROCE, ROTC, and ROTA of 44.14%, 21%, and 17.49% compare to the industry averages of 6.06%, 3.43%, and 1.80%, respectively.

Consensus Rating and Price Target Indicate Upside

Of the 19 Wall Street analysts that rated V, 17 rated it Buy, while two rated it Hold. The 12-month median price target of $245.00 indicates a 16.7% potential upside. The price targets range from a low of $216.00 to a high of $284.00.

POWR Ratings Show Promise

V’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall B rating translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight distinct categories. V has a grade of A for Quality, in sync with its higher-than-industry profitability metrics. In addition, it has a B grade for Sentiment, consistent with its revenue and earnings growth estimates.

V is ranked #6 out of 48 stocks in the Consumer Financial Services industry.

Beyond what I have stated above, we have also given V grades for Growth, Value, Stability, and Momentum. Get access to all V ratings here.

Bottom Line

V’s earnings were boosted by a significant travel demand surge and continued momentum in consumer payments. Moreover, industry tailwinds are expected to drive sustained growth in the upcoming months.

The company’s financial strength enabled it to increase its quarterly cash dividend by 20%. Given the company’s solid financials, higher-than-industry profitability, consistent dividends, and solid growth prospects, we think it could be wise to invest in the stock now.

How Does Visa Inc. (V) Stack up Against Its Peers?

V has an overall POWR Rating of B. One could also check out these other stocks within the Consumer Financial Services industry: MainStreet Bancshares, Inc. (MNSB) with an A (Strong Buy) rating, and Ezcorp Inc. CI A (EZPW) and Atlanticus Holdings Corporation (ATLC) with a B (Buy) rating.

V shares were trading at $210.23 per share on Wednesday morning, up $0.24 (+0.11%). Year-to-date, V has declined -2.03%, versus a -15.59% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...

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