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Affirm (AFRM) to Post Q3 Earnings: What You Should Expect

Affirm Holdings, Inc. AFRM is set to report its third-quarter fiscal 2023 results on May 9, after the closing bell.

Important Estimates

The Zacks Consensus Estimate for third-quarter fiscal 2023 loss per share of 91 cents suggests a 379% plunge from the prior-year loss of 19 cents. The estimate remained stable over the past week. The consensus estimate for third-quarter fiscal 2023 revenues of $366.9 million indicates a 3.4% increase from the year-ago reported figure.

Affirm beat on earnings in one of the trailing four quarters and missed thrice, the average negative surprise being 0.1%. This is depicted in the graph below.

Affirm Holdings, Inc. Price and EPS Surprise

Affirm Holdings, Inc. Price and EPS Surprise
Affirm Holdings, Inc. Price and EPS Surprise

Affirm Holdings, Inc. price-eps-surprise | Affirm Holdings, Inc. Quote


Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at AFRM’s previous-quarter performance first.

Q2 Earnings Rewind

In the last reported quarter, this leading payment network’s adjusted loss per share of $1.10 missed the Zacks Consensus Estimate by 8.9%, primarily due to increased operating costs. This was partially offset by growing transactions and a significant increase in servicing income.

Now, let’s see how things have shaped up prior to the third-quarter fiscal 2023 earnings announcement.

Q3 Factors to Note

Resilient consumer spending in the March quarter despite inflationary pressures is expected to have benefited the payment solution provider. Travel and entertainment-related spending is expected to have risen in the quarter under review. This, in turn, is likely to have augmented the strength of active merchants and consumers.

The sales figures from the virtual card networks are anticipated to have risen. The Zacks Consensus Estimate for virtual card network revenues is pegged at $25.8 million, indicating an 11.3% year-over-year rise.

The consensus mark for interest income in the fiscal third quarter is pegged at $166.1 million, indicating a 23.4% jump from the previous fiscal-year quarter’s $134.6 million. These are expected to have positioned the company for year-over-year growth in the fiscal third-quarter top line.

The positives are likely to have been partially offset by lower servicing income, merchant network revenues and higher operating costs. The consensus mark for servicing income indicates a 2.3% year-over-year fall. Also, the Zacks Consensus Estimate for gain on sales of loans suggests a 10.1% year-over-year decline.

Moreover, the consensus estimate for merchant network revenues is pegged at $111.4 million, indicating a decrease of 8% from a year ago. Reductions in the concentration of certain APR loans are expected to have affected the metric.

Also, operating costs are likely to have increased in the quarter under review, affecting the bottom line. Higher processing and servicing costs, as a result of increased volumes, are anticipated to have boosted the operating costs, reducing profits and making an earnings beat uncertain.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Affirm this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.

Earnings ESP: The company currently has an Earnings ESP of -23.08%. This is because the Most Accurate Estimate currently stands at a loss of $1.12 per share, wider than the Zacks Consensus Estimate of a loss of 91 cents.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Affirm currently carries a Zacks Rank #2.

You can see the complete list of today’s Zacks #1 Rank stocks here.

How Other Stocks Performed

Here are some companies from the Business Services space that have already reported earnings for the March quarter. These include Mastercard Incorporated MA, Visa Inc. V and The Western Union Company WU.

Mastercard reported first-quarter 2023 adjusted earnings of $2.80 per share, beating the Zacks Consensus Estimate by 3.3%. The quarterly results were driven by improved cross-border travel, coupled with an expanding payment network and value-added services and solutions. However, the upside was partly offset by the company’s escalating operating expense level.

Visa reported second-quarter fiscal 2023 earnings of $2.09 per share, which outpaced the Zacks Consensus Estimate of $1.97. The quarterly results were aided by higher payments, and cross-border volumes and processed transactions. Steady cross-border travel growth and lower-than-expected client incentives aided the results, partially offset by higher costs.

Western Union reported first-quarter 2023 earnings per share of 43 cents, which beat the Zacks Consensus Estimate by 30.3%. WU’s earnings were supported by the strength witnessed in the Middle East business, Evolve 2025’s momentum, lower consumer acquisition costs and transaction growth. However, adverse currency impact, discontinuation of operations across Russia and Belarus and promotional pricing activities partially offset the positives.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Mastercard Incorporated (MA) : Free Stock Analysis Report

Visa Inc. (V) : Free Stock Analysis Report

The Western Union Company (WU) : Free Stock Analysis Report

Affirm Holdings, Inc. (AFRM) : Free Stock Analysis Report

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