Visa (NYSE: V) It is one of the most famous brands in the world. Its payment cards are accepted by more than 80 million merchants worldwide, in more than 200 countries and regions. Despite such impressive volume, the stock has underperformed Standard & Poor’s 500 over the past three years. Can Visa keep pace and break this trend?
In this Backstage pass The video that was recorded on October 27Motley Fool shareholder Trevor Jennewine discusses Visa’s fourth-quarter earnings, facing the headwinds and tailwinds the company will face in the coming months.
Trevor Genwin: Visa is the largest payments network in the world. according to Nielsen Report, last year in 2020, the Visa network handled 40% of all purchase transactions. So it’s a huge company.
They reported earnings yesterday after the market closed. If you check the stock price today, it’s down about 7%, so something went wrong. We’ll get to that in just a second. But start from the top. This was the end of Visa’s fiscal year. So, for the fourth quarter, revenue was $6.6 billion, up 29%. And that was a small win on the top streak. Same bottom line, earnings per share of $1.65, up 70%.
Then with this company, Visa generates revenue in two ways. Take a percentage of the payment volume moving across its network. It also takes a flat fee for each transaction. For this reason, it is important to pay attention to the volume of payments and the number of transactions. When these cross-border transactions are made, an additional fee is assessed. Payments totaled $2.8 trillion for the quarter; That was 19%. But just to provide a bit of context, that percentage is up 23% from 2019.
2020 has been a very difficult year for some of these card payment companies, especially because the drop in travel means a lot less volume across borders and a lot of businesses have closed, so not much in-store spending has happened. So, the volume of payments is $2.8 trillion, up 19% from last year, and up 23% from 2019.
Cross-border trading volume increased by 41%. This number is moving in the right direction. In fact, in the last quarter, cross-border trading volume exceeded what it was in 2019. It is now positive compared to 2019. It is definitely moving in the right direction. Transactions processed amounted to $45.3 billion, an increase of 21% over the previous year and an increase of 24% over 2019.
Then to put it all together the revenue for the full fiscal year was $24.1 billion. That was 10%. Earnings per share of $5.63, up 15%. Then the volume of payments amounted to 10.4 trillion dollars, an increase of 18%. Then as I mentioned, the cross-border volume is moving in the right direction, up 14%. And 164 billion transactions were processed by the Visa network. All of these numbers were relatively constant.
The company also returned $3.7 billion to shareholders in the form of stock buybacks and a dividend, and raised its dividend by 17% to about $0.38 per share.
Looking ahead, it’s the outlook that really gave Wall Street some pause. Wall Street had been expecting growth for fiscal 2022 to reach the 20% range, slightly higher. On the earnings call, Visa said it expects higher-than-expected first-quarter growth in teen revenue. And a full year in the upper end of their mid-teens range, 16%, 17% is their forecast for the next year. That sent the stock down 7%.
And then just to add more context there, every month Visa reports on spending momentum and has a number of spending momentum indexes that have been going down. This tracks consumer spending and it rose in July and then bullish selling for August fell again in September. That could be a headwind for the company in the first quarter of fiscal 2022. On the flip side, the US is set to reopen borders to international travelers on November 8th, so that could be a tailwind. Anytime these cross-border transactions are made. If the card was issued in a different country than it is being used, the transactions are cross-border. So, getting more international travelers inside the US could boost volume across borders. All in all, a relatively strong quarter, but mixed reaction or negative reaction to future expectations of what awaits Visa.
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