Monday, October 24, 2016

Visa: FQ4 Quick Thoughts















After the close, Visa (V) reported the following numbers according to Briefing.com:



  • Reports Q4 (Sep) earnings of $0.78 per share, $0.05 better than the Capital IQ Consensus of $0.73; revenues rose 19.3% year/year to $4.26 bln vs the $4.24 bln Capital IQ Consensus, driven by the inclusion of Europe and continued growth in payments volume and processed transactions. 
  • Payments volume growth, excluding Visa Europe and on a constant dollar basis, for the three months ended June 30, 2016, on which fiscal fourth quarter service revenue is recognized, was 10% over the prior year at $1.3 trillion.
  • Visa Inc. provides its financial outlook for the following GAAP metrics for fiscal full-year 2017: 
    • Annual net revenue growth: 16% to 18% range on a nominal dollar basis, including 1.0 to 1.5 ppts of negative foreign currency impact (consensus +20%); Client incentives as a percent of gross revenues: 20.5% to 21.5% range; Annual operating margin: Mid 60s; Effective tax rate: Low 30s; and Annual diluted class A common stock earnings per share growth: Low 30s on a GAAP nominal dollar basis and mid-teens on an adjusted, non-GAAP nominal dollar basis, both including 1.5 to 2.0 ppts of negative foreign currency impact (consensus +17% to $3.32).
Outside of the per share numbers and some of the guidance, the quarterly report is highly confusing without pro-forma numbers for the Visa Europe purchase. The biggest issue is that the FQ4 tax rate was only 23.1% making the numbers again difficult to compare. The company guides to a 30% tax rate for FY17 and is more appropriate in the analysis going forward.

The FY17 guidance appears a tad light and 15% EPS growth is difficult to support a stock trading at a  forward P/E multiple of 25. The story hasn't really changed much with the stock pricing in perfection.


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