Earnings Outlook: Visa earnings: As Facebook seeks to change payments, Visa stays the course

As Facebook Inc. swims in criticism over its new efforts in cryptocurrency, one of the stalwarts of payments continue to thrive. Visa Inc. shares hit a new all-time high last week, and the card company will be looking to show that it remains on the cutting edge of digital payments when it reports earnings next Tuesday afternoon.

What to expect

Earnings: Analysts surveyed by FactSet expect Visa V, -0.71%  to report adjusted earnings per share of $1.32, up from $1.20 a year earlier. According to Estimize, which crowdsources projections from hedge funds, academics and others, the average estimate calls for $1.37 in EPS.

Visa has beaten the FactSet EPS consensus in the past 14 quarters.

Revenue: The FactSet consensus calls for $5.7 billion in revenue, while the Estimize consensus projects $5.8 billion. A year prior, Visa reported $5.2 billion in revenue.

Stock movement: Visa shares have risen following six of the company’s past 10 earnings reports. The stock has gained 36% so far this year, as the Dow Jones Industrial Average DJIA, -0.25%  has climbed 17%. Of the 39 analysts tracked by FactSet who cover Visa’s stock, 35 rate it a buy, three call it a hold, and one rates it a sell. The average price target is $186.92, 4.2% above current levels.

What else to watch for

Analysts see positive indications for the card companies coming out of recent bank earnings. Barclays’ Ramsey El-Assal points to JPMorgan Chase & Co.’s JPM, -0.99%  and Wells Fargo Corp.’s WFC, +0.46%  accelerating purchase-volume growth, which along with “other leading indicators similarly point to a broadly healthy spending environment in the U.S.”

El-Assal has an overweight rating and $170 target price on Visa shares.

Wedbush analyst Moshe Katri expects Visa to benefit from recently announced mega-mergers between merchant issuers and processors, which management may discuss on Visa’s earnings call. Such deals may make it “easier for Visa to essentially better scale its innovations (security, data, transaction speed, etc.),” Katri wrote, following meetings with company management. He also thinks that these deals could speed up the transition to digital payments in developing markets.

Katri is doubtful that Facebook’s FB, -1.21%  Libra initiative will actual prove disruptive to the payments landscape, though executives may field questions on this matter as well during Visa’s call. He rates the shares at outperform with a $187 target.

Visa may also discuss several deals of its own. In June, the company announced plans to acquire a token services and ticketing business from Rambus, and shortly after said it would buy Verifi, a company that helps limit chargebacks. The first deal in particular “represents the continued push by both Visa and Mastercard Inc. MA, -0.43%  to bolster their capabilities and value-added services in alternative/non-card-based payment flows,” wrote Jefferies’ Trevor Williams.

Visa launched its B2B Connect platform in June, which is another move beyond traditional card payments. The service is meant to capture cross-border business-to-business payments that don’t typically involve debit or credit cards. The company sees B2B payments as a key growth opportunity, and management may give an update on its efforts as well as reception to the B2B Connect launch.

“We expect corporate payment volume to consistently grow above the company average for many years,” said William Blair’s Robert Napoli, who rates the stock at outperform.

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