Visa beats forecasts on revenue and earnings | PaymentsSource

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Visa posted better-than-expected earnings in the final quarter of its fiscal year, boosted by stable growth in its payments volume, crossborder volume and processed transactions.

Fourth-quarter revenue increased 12% year over year to $9.6 billion, topping analysts’ estimates of $9.5 billion, according to S&P Global Capital IQ. Net income also edged out expectations, rising 14% to $5.3 billion, ahead of an expected net income of $5.2 billion. Earnings per diluted share landed at $2.65, ahead of an estimated $2.57 per diluted share.

Excluding a $109 million litigation provision in the year-ago quarter and other expenses, adjusted earnings for the three months ended Sept. 30 came in at $2.71 a share. Analysts polled by S&P Global Capital IQ had expected $2.58 a share.

“Visa had a robust fourth quarter to finish a very strong fiscal year,” Chief Executive Ryan McInerney said in a statement, noting that revenue and EPS in the quarter were driven by “relatively stable growth” in payments volume, crossborder volume and processed transactions as well as “strong momentum across new flows and value-added services.”

Payments volume for the prior quarter ended June 30 — which fourth quarter revenue is based on — increased 7% from the same reporting period in 2023 on a constant-dollar basis. This quarter, payment volume rose 8%.

Cross-border volume, excluding Europe, jumped 13% on a constant dollar basis. Including Europe, total cross-border volume also increased 13%.

Total processed transactions in the fourth quarter landed at 61.5 billion, an increase of 10% from the prior year.

Visa’s strong earnings in the first half of its fiscal year have been overshadowed by major headwinds that the credit card processing company will need to solve in the months ahead. 

Citizens Bank at the top of the year swapped to Mastercard for its debit card processing, and in September, the Justice Department sued Visa for an accused monopoly over the debit card industry. Visa set aside $1.5 billion to cover litigation fees. There’s also a failed settlement attempt with merchants over interchange fees, which was rejected by a federal judge in June and could go to trial. Visa CEO said last quarter he didn’t have any insight into if or when another settlement might be on the table. 

Other credit card issuers have reported a slight softening in consumer credit and purchase volume this quarter on a year-over-year basis. Discover Financial posted an increase in 30-day delinquencies and net charge-offs. Chief Financial Officer John Greene said households were contending with inflation and adjusting their spending patterns to manage budgets, pushing down Discover’s credit card sales volumes.

American Express, too, was contending with an uptick of borrow stress in the third quarter. CEO Steve Squeri said he wasn’t concerned about an uptick on a call with investors last week but noted spending wasn’t “robust.” 

Smaller credit card issuers that specialize in co-branded credit cards such as Bread Financial and Synchrony Financial also tallied increases in delinquencies and a decline in credit spending, but executives from both companies largely brushed them off on their respective earnings calls. 

Mastercard, the final credit card processing company to host an earnings call this quarter, reports earnings on Thursday ahead of the market open.