Visa stock gains after earnings as company says inflation, Ukraine war aren’t crimping spending

“While there are uncertainties created by high inflation, supply-chain disruptions, rising interest rates and the invasion of Ukraine, there is no evident impact on our global payments volumes,” Chief Financial Officer Vasant Prabhu said on Visa’s earnings call.

Visa’s fiscal second-quarter revenue rose to $7.19 billion from $5.73 billion a year before, whereas analysts tracked by FactSet had been modeling $6.83 billion in revenue. On an adjusted basis, Visa earned $1.79 a share, up 30% from a year prior and ahead of the FactSet consensus, which was for $1.65 a share.

Payment volume was up 17% in the quarter, while processed transactions rose 19%. Visa saw 38% growth in cross-border volume, or 47% when excluding transactions within Europe.

Shares were up 4.4% in after-hours trading.

In all, it was a “blowout” quarter, in the view of Wedbush analyst Moshe Katri, as Visa benefited from lower-than-anticipated incentives and improvement in high-margin cross-border spending, trends that likely helped outweigh the fact that the company had one fewer month of Russia service revenues versus a year earlier. Visa suspended its operations there in response to the Ukraine war.

Visa’s Prabhu said on the earnings call that he saw “plenty of recovery to come” in travel, given that Visa’s business from inbound travel to the U.S. indexed at only 70% of 2019 levels in the quarter, while “many” other corridors were at 90% of 2019 levels.

The company has “seen nice improvement” on volumes related to inbound U.S. travel, Prabhu told MarketWatch, and Visa is “quite optimistic” that it will see a continued recovery there. Inbound travel to the U.S. is a “very big corridor overall” so “the improvement there will be key to getting us back to 2019 levels overall,” something Visa is increasingly upbeat about when it comes to its cross-border business.

“Given where we ended the second quarter, we now expect cross-border travel ex intra-Europe to fully recover to 2019 levels by the end of our fiscal year despite the loss of Russian business,” Prabhu shared on the earnings call. Visa had previously expected to be at about 90% of 2019 levels on that metric by the end of its fiscal year in September.

The company also sees room for improvement in inbound travel to Asia, which indexed in the high-30% range of 2019 levels in the latest quarter. “The pace of travel recovery to and from Asia will be a key driver of the future trajectory,” Prabhu said on the earnings call, highlighting that most borders in Asia have opened up, though there are still restrictions in some countries.

Looking beyond travel, the company’s Latin America business showed sharp growth in the quarter, reflecting what Prabhu told MarketWatch was a “massive shift away from cash.” Volume there was up 44% from a year earlier and up 99% relative to three years ago.

“When you look at Latin America growth compared to three years ago, we’re up massively, not because of consumption growth, but because more and more people are moving away from cash, and we’re seeing that in every market,” he told MarketWatch. Additionally, he believes that the company is picking up share in many of those markets.

Overall, Visa posted fiscal second-quarter net income of $3.65 billion, or $1.70 a share, compared with $3.03 billion, or $1.38 a share, a year earlier.

The report follows one from American Express Co.
AXP,
-2.96%
late last week, which also showed benefits from a travel rebound. Fellow payment-technology peers are due to follow in the days ahead, with PayPal Holdings Inc.
PYPL,
-4.65%,
scheduled to report its results Wednesday afternoon, and Mastercard Inc.
MA,
-2.96%
on the docket for Thursday morning.

Read: PayPal has been cut in half by Wall Street, but ‘uncertainty’ still looms as earnings approach

Visa shares have declined 2.3% over the past three months as the Dow Jones Industrial Average
DJIA,
-2.38%,
of which Visa is a component, has lost 2.7%.