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Visa (V) Q2 Earnings May Disappoint: Will Stock Suffer?

Visa Inc. V is set to report fiscal second-quarter 2016 results on Apr 21, 2016 after the market closes. Last quarter, the company had posted a positive earnings surprise of 1.47%. Let’s see how things are shaping up for this announcement.

Factors to be Considered this Quarter

Visa’s international business and cross-border volumes are likely to have suffered from the impact of the strong U.S. dollar. Also, the weak and uncertain global economic environment added to the company’s woes.

Outbound commerce from China and the Middle East is likely to have weakened further. Moreover, low oil price and weak commodity market are expected to have adversely affected revenue growth rate in Brazil, Russia and the Middle East.

Visa estimated to incur $125 million in interest expenses in the fiscal second quarter. Expenses are expected to increase in mid-single-digit range attributable to higher personnel cost and increase in network and processing expenses due to Russia.

Nevertheless, new initiatives undertaken by the company to increase demand for electronic and mobile payment facilities are likely to have favorably impacted growth in the to-be-reported quarter. Service and transaction processing revenues are likely have remained strong.

In addition, Visa’s earnings are likely to have boosted by increased card usage owing to the expanding customer base and continued growth in electronic payments.

With respect to the surprise trend, Visa delivered positive surprises in three of the last four quarters with an average beat of 7.13%.

Earnings Whispers

Our proven model does not conclusively show that Visa is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Visa’s Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 66 cents.  

Zacks Rank: Visa carries a Zacks Rank #4 (Sell).

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Currently, the stock is trading at $81.45. We expect the release to lead to stock movement.

Stocks to Consider

Here are some companies that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:

Equifax Inc. EFX has an Earnings ESP of +1.75% and a Zacks Rank #2. The company is slated to report first-quarter earnings results on Apr 27.

Fidelity National Information Services, Inc. FIS has an Earnings ESP of +2.70% and a Zacks Rank #3. The company is likely to report first-quarter earnings results on May 3.

Envestnet, Inc. ENV has an Earnings ESP of +30.0% and a Zacks Rank #3. The company is expected to report first-quarter earnings results on May 5.

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EQUIFAX INC (EFX): Free Stock Analysis Report
 
VISA INC-A (V): Free Stock Analysis Report
 
FIDELITY NAT IN (FIS): Free Stock Analysis Report
 
ENVESTNET INC (ENV): Free Stock Analysis Report
 
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