Will Visa (V) Disappoint this Earnings Season? - Analyst Blog

Global electronic payment processing giant Visa Inc. V is scheduled to release its second-quarter of fiscal 2014 financial results after the closing bell on Apr 24.

In the last reported first-quarter of fiscal 2014, the company had delivered a 1.9% positive earnings surprise, while the four-quarter trailing average beat is pegged at 4.3%. Let's see how things are shaping up for this announcement.

Factors that Seek Attention

Visa benefits from a debt-free balance sheet, constant synergies from diversified business strategies, technology upgrades, effective marketing efforts, and cost-cutting initiatives along with a healthy market recovery. Capital deployment through strategic acquisitions and alliances and incremental shareholder value also boost investor confidence.

However, higher expenses and an adverse impact of currency fluctuation along with a tepid outlook for fiscal 2014 raise caution regarding an earnings beat. Moreover, increasing regulatory compliances and intermittent litigation charges continue to restrict the desired upside, overall justifying our neutral stance on the stock.

Going ahead, Visa's growth is expected to remain sluggish in comparison to prior years. This is also reflected in its top-line growth guidance in the low double digits, excluding a 2% reduction due to the negative impact of foreign currency, and bottom-line growth in mid-to-high teen range in fiscal 2014, lower than 22% growth recorded in fiscal 2013.

Earnings Whispers?

Our proven model shows that Visa is unlikely to beat earnings as it lacks the required combination of two key ingredients.

Zacks ESP: Visa has a negative Zacks ESP. That is because Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate of $2.17 per share and the Zacks Consensus Estimate of $2.19, is -0.91%.

Zacks Rank: Visa has a Zacks Rank #3 (Hold). Note that stocks with Zacks Rank #1, 2 and 3 have significantly higher chances of beating earnings. Conversely, sell-rated stocks (#4 and 5) are never considered going into the earnings announcement. 

The combination of Visa's Zacks Rank #3 and -0.91% ESP deter us from being confident of an earnings beat on Apr 24.

Other Stocks to Consider

Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this coming quarter: 

Endurance Specialty Holdings Ltd. ENH, earnings ESP of +9.91% and a Zacks Rank #1 (Strong Buy).

Lazard Ltd. LAZ, earnings ESP of +1.82% and a Zacks Rank #1.

CBOE Holdings Inc. CBOE, earnings ESP of +3.70% and a Zacks Rank #3 (Hold).