Hedgeye CEO Keith McCullough is adding Visa (V) to the long side of Investing Ideas. Below is a brief note.
The Machine is just pounding on the "Secular Growers" (Software Stocks in particular, which we agree with), so we're going to register a rare immediate-term TRADE #oversold signal within Visa's (V) Bullish @Hedgeye TREND.
Here's Josh Steiner's recent recap of what was an awesome quarter:
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Visa posted another round of solid results in the third quarter of its fiscal year, highlighted by +11.5% Y/Y, above-consensus growth in net revenues and an expanded core operating margin. Service, data processing, and international revenues of $2.41B, $2.66B, $1.98B grew +9.5%, +12.8%, and +8% Y/Y, coming in +1.7%, -0.3%, and +0.51% relative to street estimates, respectively. Other revenues of $342M grew by +49%, surpassing street estimates by +8%. In addition, client incentives of $1.55B, although up +12.5% Y/Y and one percentage point higher than gross revenue growth, registered -5% below consensus, with the contra-revenue figure accounting for 20.93% of gross revenues. Operating expenses were -18% lower Y/Y, driven entirely by the $600M litigation provision taken in the prior year quarter. Excluding the -99.8% decline in litigation provision, operating expenses grew by +10% Y/Y. Accordingly, core operating margin, measured as EBIT ex. litigation provision and irregular/infrequent items, came in at 52.92%, marking a +0.39% linked-quarter and +0.23% Y/Y expansion. As a result, operating income increased by +35% Y/Y, with pretax income rising by +37.5% as a result of a lower interest expense, and net income rising by +33% following a higher tax provision. In sum, diluted GAAP and Non-GAAP EPS of $1.37 grew by +37% Y/Y, aided by a -2.5% Y/Y reduction in the weighted-average share count and ahead of street estimates for $1.32. Furthermore, during the quarter, Visa generated free cash flow of $2.6B, returning $2.7B to investors through share repurchases of $2.1B, or 12.9MM shares, and dividends of $565MM. |
Buy on red,
KM