Visa Remains Unfazed By The Banking Crisis, An Economic Slowdown And Other Macroeconomic Challenges

Despite the tough macroeconomic conditions, the undisputed champion of the payments industry has once again exceeded expectations. Visa V’s net income margin continues to be among the best in the world with growing dividends and buybacks continuing to please its shareholders. Like American Express Company AXP, Visa’s report showed continued rise in spending as interest in travel remains strong, with the latest report marking its eight straight quarter of rising top and bottom lines. 

Fiscal Second Quarter Figures

For the first three months of 2023, Visa’s revenues rose 11% YoY as they amounted to $8 billion, topping the $7.80 billion that Fact Set expected. 

While its credit card competitor American Express missed estimates and reported a 12% earnings drop that resulted in EPS of $2.40 per share last Thursday, Visa’s adjusted earnings jumped 19.4% to $2.09 per share, topping the expected $1.99. Unlike Visa’s, American Express’ bottom line didn’t benefit from its top line skyrocketing 22% that led to a record revenue of $14.28 billion, topping $13.98 billion that FactSet expected. Unlike Visa and Mastercard MA, American Express carries balances on its books. Visa and Mastercard make money from credit and debit card transaction fees.

Rising Volumes

Payments volume rose 10% while processed transactions increased 12% compared to last year’s quarter. Volume of international transactions rose 24% to $2.75 billion but when Europe is excluded, it actually skyrocketed 32%. Although US and Europe make 68% of Visa's total payment volumes, the main catalyst for revenue growth actually lies in international transactions as Visa has many new markets in which it can grow. Data processing revenues is a more mature segment that grew more modestly at 10% to $3.82 billion, but it still smashed expectations of $3.77 billion.

Like net revenues, total operating expenses rose 11%. To maintain a strong net income margin above 50%, Visa knows it's crucial to control these expenses.

A Favorable Position With A Promising Outlook

Visa is the largest publicly traded payments processing company in the world and like in any industry, size matters a lot in the payments processing industry as the bigger the dollar volume a company processes and cards it has on its payment network, the more likely businesses will accept their payment methods. Being the industry leader who is constantly strengthening its competitive position, it's no wonder that Visa’s outlook looks promising. Moreover, Visa and Mastercard form a duopoly when it comes to digitizing payments and with the society moving towards a cashless future, the undergoing trend is further fueling their revenues. 

A Proof Of Resilience

Once again, Visa demonstrated its resilience in virtually any macroeconomic environment. It continued thriving in these challenging times, including the latest banking crisis and higher interest rates that caused the economic slowdown.

Mastercard Is Next

Visa’s peer, Mastercard, will be publishing its results later today. Although like Visa, Mastercard is also one of the steadiest stocks in the market, analysts expect Mastercard’s earnings to drop 1.8% to $2.71 per share despite an expected surge of 8.4% in revenue which is expected at $5.64 billion.