Last week, you might have seen that Visa Inc. (NYSE:V) released its full-year result to the market. The early response was not positive, with shares down 6.6% to US$185 in the past week. It looks like the results were a bit of a negative overall. While revenues of US$22b were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 2.3% to hit US$4.89 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Visa after the latest results.
View our latest analysis for Visa
Taking into account the latest results, the consensus forecast from Visa's 25 analysts is for revenues of US$23.2b in 2021, which would reflect a reasonable 6.1% improvement in sales compared to the last 12 months. Per-share earnings are expected to accumulate 7.3% to US$5.45. Before this earnings report, the analysts had been forecasting revenues of US$24.0b and earnings per share (EPS) of US$5.76 in 2021. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a small dip in earnings per share estimates.
The analysts made no major changes to their price target of US$220, suggesting the downgrades are not expected to have a long-term impact on Visa's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Visa analyst has a price target of US$250 per share, while the most pessimistic values it at US$171. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Visa shareholders.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Visa's revenue growth is expected to slow, with forecast 6.1% increase next year well below the historical 11%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 14% next year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Visa.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Visa. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at US$220, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on Visa. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Visa going out to 2024, and you can see them free on our platform here..
We don't want to rain on the parade too much, but we did also find 2 warning signs for Visa that you need to be mindful of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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