Visa tops profit forecast as CFO sees ‘no evidence of downturn’ in spending

Visa Inc. It beat expectations with its latest results on Tuesday and gave investors an optimistic signal about the resilience of spending volumes in the current macroeconomic climate.

Amid growing concern about the state of the consumer due to factors such as rising inflation and higher interest rates, Visa V,
Join the associate card company American Express Co. AXP,
In emphasizing that the uncertain landscape did not adversely affect the volumes.

“We see no evidence of a decline in consumer spending,” Chief Financial Officer Vasant Prabhu said on the company’s earnings call.

The executives acknowledged that consumers can change their behavior, but not in a way that appears in Visa’s results.

“What we don’t know is the level of substitutions that occur, where people might buy more staples and less discretionary items, but spend at the same level they did, or whether people are trading from brand to private label retailers as some retailers have said,” CEO Al Kelly said on the call, according to a transcript from Sentieo.

“Obviously inflation is in our numbers and people are likely to … make some changes to what they buy,” he added, but “are not changing the way they pay.”

Visa’s revenue for the third quarter of the fiscal year grew to $7.3 billion from $6.1 billion, while analysts had expected $7.1 billion.

The company achieved net income of $3.41 billion, or $1.60 per share, compared to $2.58 billion, or $1.18 per share, in the same period last year. Analysts tracked by FactSet expected $1.73 a share of GAAP’s earnings. On an adjusted basis, Visa earned $1.98 per share, up 33% from the prior year and above the FactSet consensus, which was $1.75 per share.

Visa saw payment volumes rise 12% with processed transactions increasing 16%. Cross-border volume increased by 40% while cross-border volume excluding intra-European transactions increased by 48%.

“Consumers are back on the road, visiting different parts of the world, resulting in the volume of cross-border travel exceeding 2019 levels for the first time since the pandemic began in early 2020,” Kelly said in a statement. “While the economic outlook is unclear, we remain confident in our ability to implement with discipline.”

Visa executives maintained the earnings call that the pace of the travel recovery has continued to exceed their expectations since late last year.

“The next and possibly the last stage of cross-border travel recovery will have to wait for the full reopening in China, which we don’t expect in the near future,” Prabhu added.

Shares were almost flat in after-hours trading on Tuesday.

Visa remained upbeat about online spending, with Kelly noting that spending with non-current cards, excluding travel, was well ahead of pre-pandemic levels last quarter.

The company’s optimistic tone about e-commerce comes after Shopify Inc. a store,
CEO Toby Lutke admitted earlier Tuesday that he was “wrong” in predicting that “the share of dollars traveling through e-commerce rather than physical retail… will permanently jump forward by 5 or even 10 years.”

Visa’s Prabhu told MarketWatch that Visa “never believed when we saw big spikes that all of this is sustainable,” but at the same time, he believes e-commerce is still “well ahead” of where the pandemic would have happened.

While Visa in recent chapters has highlighted some of its crypto-related partnerships in earnings calls, the company didn’t mention the word “crypto” at all in the last call, according to a Sentieo text review.

Prabhu told MarketWatch that the crypto downturn “hasn’t changed our views on crypto at all” and that Visa was still “very focused on all the things we were doing before,” such as enabling people to buy crypto or allowing them to use it. Crypto accounts for buying and selling things.

Visa’s earnings come as companies have given mixed signals so far in the reporting season about consumer behavior and how it isn’t changing amid the developing economy.

Whereas Walmart Inc. WMT,
It lowered its earnings forecast late Monday, warning that inflationary pressures around food costs are leaving consumers with less income for categories such as apparel, and American Express executives were bullish last week about spending trends on the higher end. Amex chief financial officer Jeff Campbell told MarketWatch that “if you think about the actual signs of stress, we don’t see any” within the company.

Moreover, earlier on Tuesday, Fiserv Inc. FISV,
+ 4.25%
“The consumer remains resilient,” CEO Frank Bisignano said on the company’s earnings call.

“It’s too early to draw any final conclusions about inflation,” said Visa’s Kelly, although he noted that key inflation numbers are not necessarily in line with the ways inflation is expected to manifest in Visa spending.

“Consumers don’t buy used homes or cars with Visa cards, for example, so we see a multi-point gap between headline inflation and inflation in the spending categories associated with the card,” he said.

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