Will Coronavirus-Led Business Loss Mar Visa (V) Q2 Earnings?

Visa Inc.’s V second-quarter fiscal 2020 earnings results  set to report on Apr 30, 2020, after the market close are likely to reflect the negative impact of coronavirus.

Visa's cross-border business is likely to have been hurt by the visible reduction in cross-border travel as people across the globe are staying home as a precautionary measure following lockdowns and the imposition of safe-distancing norms. This situation might have induced a sharp slowdown in the company’s cross-border business, particularly travel-related spending in both card present and card not present.

Cross-border business, which accounted for roughly 34% of the company’s proprietary volumes in 2019, is likely to have been down substantially. This decline might have been caused by a significant drop in Travel and Expenditure spending. Non-T&E spending is also expected to have fallen modestly. Nevertheless, some areas including grocery spending and online commerce are likely to have been stable and even accelerated moderately while other categories, such as traditional retail might have endured weakness in spending.

Along with a steep descent in cross-border payment, which might have dented revenues from outside the United States, Visa is also expected to have suffered lower consumer spending across the country, which drives its domestic revenues (contributing to 42% of total revenues in fiscal 2019).

Also, operating expenses in the quarter are expected to have decreased post the company’s possible actions taken to manage its expenses prudently including evaluation of travel & entertainment; advertising & marketing, etc.

Guidance

Management confirmed that cross-border volumes in the last two weeks of January were negatively impacted by the shifts in the Chinese New Year with initial effects of the coronavirus outbreak.

Per the company, due to the currently-plaguing pandemic, if cross-border business persisted its softness through the end of the fiscal second quarter, then year-over-year net revenue growth for the period will be anticipated at2.5-3.5%, indicating a deterioration from the previous estimate provided on first-quarter fiscal 2020 earnings conference call.

Management’s estimate for second-quarter fiscal net revenue growth was in low-double digits, slightly better than the figure reported in the fiscal first quarter (revenues up 10% year over year).

Q2 Earnings & Revenue Expectations    

The Zacks Consensus Estimate for Visa’s earnings of $1.35 per share in the fiscal second quarter implies a 3.05% increase from the prior-year reported number. Likewise, the consensus estimate for sales of $5.78 billion suggests a 5.25% rise from the year-ago reported figure.

Earnings Surprise History

The company boasts an attractive earnings surprise history, having surpassed estimates in three of the last four quarters (met estimates in one), the average being 2.87%. This is depicted in the chart below:

Visa Inc. Price and EPS Surprise

Visa Inc. Price and EPS Surprise

Visa Inc. price-eps-surprise | Visa Inc. Quote

Here is what our quantitative model predicts:

Our proven model does not conclusively predict an earnings beat for Visa this reporting cycle. The combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — increases the odds of a positive surprise.

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

Earnings ESP: Visa has an Earnings ESP of -0.25%.

Zacks Rank: Visa currently carries a Zacks Rank #4 (Sell).

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

Stocks That Warrant a Look

Here are some stocks worth considering from the finance sector as our model shows that these have the right combination of elements to beat on earnings this time around:

Virtu Financial, Inc. VIRT has an Earnings ESP of +39.67% and a Zacks Rank #1 (Strong Buy).

Green Dot Corp. GDOT has an Earnings ESP of +8.19% and is Zacks #3 Ranked.

Global Payments Inc. GPN  has an Earnings ESP of +0.59% and a Zacks Rank of 3.

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