Visa (V, Financial) reported second-quarter earnings that beat Wall Street expectations by a wide margin on both the top line as well as the bottom line, pushing the stock price higher after the results were released. Despite being the volume leader in the highly mature financial services industry, Visa continues to expand its payments volume quarter after quarter.
Visa reported earnings per share of 86 cents and revenues of $4.48 billion, much higher than the market’s expectation of 79 cents per share and $4.295 billion in revenues. Visa’s quarterly revenues grew a whopping 23%, but the real reason for the double-digit expansion was the acquisition of Visa’s European unit.
Visa’s total payment volume (TPV) grew 37% during the quarter to hit $1.73 trillion. Just to put Visa’s size in perspective, its TPV for the quarter is nearly four times higher than PayPal’s (PYPL, Financial) total payment volume of $354 billion for full fiscal 2016.
Visa Checkout, an online payment option Visa launched in 2014, had more than 20 million enrolled accounts at the end of the second quarter.
Visa also announced a $5 billion share buyback program that will certainly help Visa’s stock price, which is already on an upward trend since December 2016.
Visa’s performance last year was solid as operating revenues increased from $13.88 billion to $15.08 billion, a growth of 8.6%. Visa now expects 2017 net revenues to grow in the 16% to 18% range.
It’s a little bit difficult to pinpoint how much Visa Europe will contribute to the expected double-digit growth, but as long as TPV keeps expanding, Visa’s stock price will keep moving north.
Visa is aggressively expanding its position in the Asia Pacific region, where the financial services market still has plenty of room to grow. During the second quarter earnings call, Visa CEO Al Kelly said:
“In Asia Pacific, we signed a 10-year exclusive partnership with ANZ Bank. In both Australia and New Zealand, we also signed a commercial credit partnership with Citibank covering multiple markets in Asia Pacific. In Taiwan, we signed a multiyear credit and debit agreement with CTBC Bank Taiwan.
“In our Latin America region, Banco Popular de Puerto Rico, the largest bank and credit card issuer in Puerto Rico renewed a multiyear credit and debit partnership.
“In Europe, we signed a PAN-Nordic debit renewal with Nordea Bank and a commercial and consumer card renewal with BNP Paribas Group in France.”
Visa is trading near its all-time highs, and the quarterly earnings beat and strong payment volume growth will allow the company to keep its valuation multiples intact.
Disclosure: I have no positions in the stock mentioned above and no intention to initiate a position in the next 72 hours.
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