Visa announced strong earnings for the quarter that ended Dec. 31, 2023, but the company's disclosure on Thursday that U.S. consumer card spending faltered during the first few weeks of this year caused the card network's stock to dip.
Chief Financial Officer Chris Suh said the spending slowdown is likely to be short-lived. "We've seen these types of weather-related patterns before. They tend to be short blips, and over the course of the quarter, they tend to get smoothed back out," he told analysts during a conference call.
Visa also noted a decline of about 80 basis points in total U.S. payments volume growth from the end of September to the end of December, which Suh attributed to "a less favorable mix of weekends and weekdays" for shopping, reassuring analysts that Visa sees no long-term effects from these recent trends.
"Consumer spend across all segments from low to high spend has remained relatively stable. Our data does not indicate any meaningful behavior change across consumer segments," Suh said.
By midday Friday, Visa's stock was trading at 4% below the previous day's close, at $268 a share, from $272 at the end of Thursday.
Visa CEO Ryan McInerney touted Visa's recent progress on driving contactless payments adoption and its ongoing success in helping banks and merchants convert more transactions from cash, check and ACH to digital flows.
Contactless payment penetration in the U.S. reached 45% during the most recent quarter, compared with 77% of all face-to-face transactions elsewhere, McInerney said during the conference call. U.S. consumers who tap to pay make an average of two more Visa transactions per month, lifting their spending by $70 a month, compared with those who don't tap to pay, McInerney said.
Visa's global payments volume was up 8% during its first fiscal quarter, while processed transactions rose 9% and cross-border transactions increased 16%. U.S. payment volume rose 5% year over year, credit rose 6% and debit grew 5%.
"We continue to seek new partnerships, new use cases and new verticals to drive our business forward, with a particular emphasis on cross-border," he said.
Instant debit transactions powered by Visa Direct increased 20% year over year, to 2.2 billion, with peer-to-peer cross-border transactions alone up more than 65% year over year, according to McInerney.
Visa also noted that its agreement last month to acquire a majority interest in Prosa, a Mexico-based payments processor, combined with the closing this month of its
"CEOs at banks around the world … are trying to make this transition from their legacy tech stacks to the cloud," McInerney said, adding that Visa determined that despite being based in Brazil, Pismo can support this need for all sizes of banks globally.
Suh reaffirmed a positive growth outlook for Visa for the year, forecasting that second-half results will benefit from higher average ticket sizes in the U.S. and inflation in certain international regions.
Visa expects net revenue in the current quarter to grow at an "upper-mid to high-single-digit" rate, while revenue growth will accelerate to the low double digits for the full year.
Operating expenses were down slightly during the latest quarter, to $2.7 billion, from $2.8 billion a year earlier, due to a lower provision for litigation, while other costs rose nominally.
Revenue during the quarter was $8.63 billion, up from $7.94 billion during the same period a year earlier. Net income was $4.9 billion, compared with net income of $4.2 billion in the same period a year earlier.
"We're optimistic that the weather-driven slowdown in January will prove transitory, but with the stock near all-time highs and a murkier path to second-half estimates, we expect the stock to take a breather in the near term," analysts at Jefferies wrote in a Friday note to investors.
