Shares of Visa Inc. (NYSE:V) rose in after-hours Thursday after the credit-card company reported better than expected earnings and revenue, setting the stage for continued growth in 2020. Visa’s management team is already looking ahead to the upcoming Tokyo Olympics as a means to drive payments digitization in the largely cash-driven nation.
Earnings Summary
- Earnings: $1.47 per share (adjusted)
- Revenue: $6.1 billion
Visa capped off fiscal 2019 on a high, with adjusted fourth-quarter earnings rising 13% to $1.47 per share on revenues of $6.1 billion. Analysts in a median estimate had called for per-share earnings of $1.43 on $6.08 billion in revenue.
Payments volume in the final quarter rose 9%, while cross-border volume jumped 7%. Processed transactions were up 11% year-over-year, the company said during the earnings call.
Visa is clearly benefiting from the continued shift towards credit cards and e-commerce, which have become part and parcel of the digital economy in most advanced industrialized nations. The company believes it will carry the momentum forward heading into the summer Olympics in Tokyo next year. Although Japanese commerce is largely driven by cash, the government is developing new infrastructure to boost payments digitization.
The one area that could undermine Visa is consumer spending, which drives the bulk of economic activity in North America, Australia and Europe. As global growth continues to weaken, it’s expected that consumer spending will also take a hit.
In the United States, retail sales declined in September after six months of successive growth. They’ve also dropped four times in the last year.
For investors, retail sales are a key proxy for consumer spending.
Visa Stock Continues to Shine
The value of Visa’s stock surged 2.8% on Thursday to close at $176.16. By comparison, the Dow Jones Industrial Average fell 0.1%. The stock continued to gain in after-hours trading.
So far this year, V stock has risen over 35% compared with 15% for the Dow.
At current values, Visa has a total market capitalization of $394.6 billion. It’s the seventh-largest Dow component by total weight.
The stock is poised for continued growth over the next 12 months as Visa prioritizes payment volume through its various channels. The company has already seen an “unprecedented level of renewal activity” with big-name clients such as Chase Bank and others.
At this rate, there isn’t much concern that a cyclical downturn in consumer spending will affect Visa. That could change if major economies like the United States continue to slide.
Disclaimer: Author holds no investment position in Visa at the time of writing.
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