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Alberto Abaterusso
Alberto Abaterusso
Articles (1665) 

Visa and PayPal Surprise on Profit

The large consumer financial services companies announced earnings on Wednesday

January 31, 2019 | About:

These large consumer financial services large caps have released earnings on Wednesday.

Visa Inc. (NYSE:V) issued adjusted and GAAP earnings per share of $1.30 for the first quarter of fiscal 2019 after market close and beat consensus by 5 cents. Earnings rose 21% year-over-year from revenues of $5.5 billion, which reflected 13.2% growth from the prior-year quarter. Visa also beat consensus on first-quarter revenues by $90 million.

The San Francisco, California-based global financial services corporation reported 11% growth in both payments volume and processed transactions and a 7% increase in cross-border volume. 

Among segments, service revenues grew 9% to $2.342 billion, data processing revenues increased 15% to $2.47 billion, international transaction revenues increased 11% to $1.851 billion and other revenues jumped 30% to $299 million. Approximately 21% of gross revenues, or $1.5 billion, was for client incentives.

Visa employed $2.9 billion in cash flows for the payment of dividends and buyback programs. Regarding buyback programs, Visa's board of directors authorized an $8.5 billion repurchase of its shares.

For full fiscal year 2019, the company forecasts annual class-A common stock adjusted earnings per share growth in the mid-teens. Visa also sees annual net revenue growth in the low double digits on a nominal basis. Both predictions consider the adverse impact from forex and new revenue accounting standard.

The stock was trading around $137.6 per share at close Wednesday for a market capitalization of approximately $312.6 billion. The share price rose 9% for the 52 weeks through Jan. 30 and is now below the 100-day simple moving average line, on par with the 200-day SMA line and above the 50-day SMA line. The 52-week range is $111.02 to $151.56.

The stock has a price-book ratio of 11.01, a price-sales ratio of 15.54 and a price-earnings ratio of 31.20. The industry has medians of 1.19 for the price-book ratio, 3.46 for the price-sales ratio and 16.14 for the price-earnings ratio.

Visa is granting a forward dividend yield of 0.74% versus an industry median of 2.72% as of Jan. 30.

The recommendation rating is 1.7 out of 5, and the average target price is $162.6.

PayPal Holdings Inc. (NASDAQ:PYPL) released GAAP earnings per share of 49 cents for the fourth quarter of fiscal 2018 after market close. It beat consensus by 5 cents on GAAP earnings per share. The revenue of $4.23 billion grew 13.1% year-over-year, on par with expectations.

In addition, the GAAP operating margin decreased 837 basis points to 14.2% and the non-GAAP operating margin decreased 18 basis points to 21.6% in the fourth quarter of 2018 from the same quarter of 2017.

For the first quarter of fiscal 2019, the company has guided for revenue of approximately $4.08 billion to $4.13 billion versus consensus of $4.16 billion and non-GAAP earnings per share of 66 cents to 68 cents versus consensus of 68 cents.

For full fiscal year 2019, PayPal has guided for revenues of approximately $17.85 billion to $18.1 billion versus consensus for $18.04 billion and non-GAAP earnings per share of about $2.84 to $2.91 versus consensus of $2.88.

These are the most relevant key business drivers reported by PayPal on a foreign exchange rate-neutral basis. The volume growth on eBay Marketplaces was flat in the fourth quarter of 2018 compared to the same quarter of 2017. PayPal processed a total payment volume for $164 billion in the fourth quarter of 2018, which reflects 25% growth year-over-year. Approximately $19 billion was processed by Venmo in total payments volume in the fourth quarter, reflecting an 80% increase.

The share price traded around $92.4 at close Wednesday for a market capitalization of about $108.9 billion. The share price is above the 200-, 100- and 50-day simple moving average lines. The 52-week range is $70.22 to $94.58. The share price has increased 18% over the past year.

The price-book ratio is 7.2 versus an industry median of 1.19, the price-sales ratio is 7.48 versus an industry median of 3.46 and the price-earnings ratio is 53.42 versus an industry median of 16.14.

PayPal is not paying a dividend.

Disclosure: I have no positions in any securities mentioned.

About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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