Visa tops earnings expectations as CFO sees ‘no evidence of a pullback’ in spending

Visa Inc. topped expectations with its latest results Tuesday and gave an upbeat signal to investors about the resilience of spending volumes in the current macroeconomic climate.

Amid increasing unease about the state of the consumer given factors like rising inflation and higher interest rates, Visa
joined fellow card company American Express Co.
in asserting that the uncertain landscape has yet to negatively affect volumes.

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

Executives acknowledged that consumers could well be changing their behaviors, but not in a way that would show up in Visa’s results.

“What we don’t know are what level of substitutions are taking place, where people might be buying more staples and less discretionary items but they’re spending at the same level they did, or whether as some retailers have said, people are trading down from brands to private labels,” Chief Executive Al Kelly said on the call, according to a transcript from Sentieo.

He added that “clearly, inflation is in our numbers and people are likely… making some changes on what they’re buying,” but “they’re not changing how they’re paying.”

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

The company notched net income of $3.41 billion, or $1.60 a share, compared with $2.58 billion, or $1.18 a share, in the year-earlier period. Analysts tracked by FactSet were expecting $1.73 a share in GAAP earnings. On an adjusted basis, Visa earned $1.98 a share, up 33% from a year before and above the FactSet consensus, which was for $1.75 a share.

Visa saw payments volume rise by 12% as processed transactions increased 16%. Cross-border volume climbed by 40% while cross-border volume exclusive of intra-Europe transactions was up 48%.

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

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

“The next and perhaps the last leg of the cross-border travel recovery will have to await a full reopening in China, which we do not expect in the near future,” Prabhu added.

Shares were nearly flat in after-hours trading Tuesday.

Visa remained upbeat about online spending, with Kelly noting that card-not-present spending, excluding travel, was significantly ahead of pre-pandemic levels in the latest quarter.

The company’s optimistic tone on e-commerce comes after Shopify Inc.
Chief Executive Tobi Lütke earlier Tuesday admitted that he was “wrong” to predict that “the share of dollars that travel through e-commerce rather than physical retail…would permanently leap ahead by 5 or even 10 years.”

Visa’s Prabhu told MarketWatch that Visa “never believed when we saw big spikes that that all was sustainable,” but at the same time, he thinks that e-commerce is still “way ahead” of where it would be had the pandemic not happened.

While Visa in recent quarters highlighted some of its cryptocurrency-related partnerships on earnings calls, the company didn’t mention the word “crypto” at all on the latest call, according to a review of the Sentieo transcript.

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 cryptocurrencies or allowing them to use their crypto accounts to buy and sell things.

Visa’s earnings come as companies have given mixed signals thus far in the reporting season about how consumer behavior is and isn’t changing amid an evolving economy.

While Walmart Inc.
cut its earnings forecast late Monday, warning that inflationary pressures around food costs were leaving consumers with less disposable income for categories like apparel, executives at American Express were upbeat last week about spending trends at the high end. Amex Chief Financial Officer Jeff Campbell told MarketWatch that “if you think about actual signs of stress, we don’t see any” within the business.

Furthermore, earlier Tuesday, Fiserv Inc.
Chief Executive Frank Bisignano said on the merchant-acquiring company’s earnings call that “the consumer remains resilient.”

Visa’s Kelly said that “it’s just too early to draw any definitive conclusions about inflation,” though he noted that headline inflation numbers don’t necessarily align with the ways inflation would be expected to manifest in Visa spending.

“Consumers just don’t buy homes or used cars with their Visa cards, for example, so we see a several-point gap between headline inflation and inflation in card-related spend categories,” he said.