Fly Intel: What to watch in credit card space earnings reports - InvestingChannel

Fly Intel: What to watch in credit card space earnings reports

American Express (AXP), MasterCard (MA), and Visa (V) are scheduled to report quarterly results on April 24, 29, and 30, respectively. What to watch for: 1. OUTLOOKS: Last month, MasterCard provided an update regarding COVID-19 and suspended its fiscal year 2020 outlook. The company said that it now expects first quarter growth in net revenue in the low-single-digits range. MasterCard has also seen some shifts in foreign exchange rates and anticipates that the currency impact will be about a 2-percentage point headwind to net revenue growth in the first quarter. First quarter growth in operating expenses should be in the low-to-mid-single-digits range. Meanwhile, American Express also said it sees first quarter adjusted earnings per share between $1.90-$2.10, with consensus at $2.17, and revenue growth of 2%-4% on an FX-adjusted basis. While performance in January and February of this year largely showed strong momentum consistent with 2019, the company observed softness in spending volumes in the last few days of February amid the COVID-19 pandemic. This softness has accelerated into March and spread more globally. Given the ongoing uncertainty surrounding the duration, magnitude and geographic reach of COVID-19, American Express also said it is not able to forecast its future financial results beyond the first quarter at this time. In a regulatory filing on March 30, Visa said that, “The impacts (from the COVID-19 situation) to cross-border volume as well as processed transactions will affect fiscal second quarter international transaction and data processing revenues. For the fiscal second quarter ending March 31, 2020, on a GAAP basis, Visa expects net revenue growth in the mid-single digits, operating expense growth in the high single digits and earnings per share growth in the high end of low single digits. On a non-GAAP and constant dollar basis, excluding acquisitions, Visa expects net revenue growth in the high end of mid-single digits, operating expense growth in the low end of high single digits and earnings per share growth in the high end of mid-single digits.” 2. TRAVEL HEADWIND UNDERAPPRECIATED: Earlier this month, Jefferies analyst Trevor Williams downgraded both Visa and MasterCard to Hold from Buy, arguing that the depth and duration of the headwind on the companies’ cross-border results from a decrease in international travel is currently being underappreciated. Following the September 11 attacks, it took three years for international travel volumes to climb back to pre-attack levels, and he assumes a similar post-9/11 recovery coming out of COVID-19. Williams also forecasts that April volume updates from Visa and MasterCard on their upcoming earnings calls will show that U.S. payment volume declined 25% or worse, which “could prove sobering.” The analyst lowered his price target on Visa to $180 from $190 and cut his target on MasterCard shares to $275 from $290. 3. BITCOIN REWARDS: Bloomberg’s Matthew Leising reported that “credit card giant” Visa is giving the mainstream adoption of Bitcoin (BITCOIN) a hand after teaming with Fold, a startup which describes itself “as building the payments stack for a new economy. “As much as 10% of cash purchases made with the co-branded credit card from San Francisco-based Fold and Visa will be credited to users in Bitcoin.” said Bloomberg, citing, Fold CEO Will Reeves.