Visa cites rising unemployment as it withdraws full-year financial guidance

Visa Inc. (NYSE: V) released its second-quarter earnings report on Thursday that posted a 4% increase in profit. The company, however, cited rising unemployment due to COVID-19 as it withdrew its full-year financial guidance. Amidst the pandemic, Visa added, people are conserving more cash.

In January before the outbreak pushed parts of the U.S economy into a halt, Visa had estimated low-double digits growth in its revenue in 2020.

As the health crisis forced restaurants, bars, clothing stores, and other non-essential retailers into temporarily shutting down stores in March, retail sales in the United States noted an unprecedented drop in March. The hit to the U.S retail sector was stronger than the expected increase in consumer spending on essential items and at online stores like Amazon.

According to the CFO Vasant Prabhu:

“About 1.4 of Visa’s payments volume is in the hardest-hit categories, including travel, fuel, restaurants, and entertainment.”

Visa records a 5% surge in total payments volume

At £1.71 trillion, total payments volume for Visa surged 5% in the recent quarter as compared to a much broader 8.2% growth recorded in the same quarter last year.

The American multinational financial services corporation, however, said that online spending in the last 2 weeks of April was seen moderating. The stimulus checks, the company added, that were offered to millions of U.S citizens are serving to fuel spending in multiple sectors including automotive, home improvement, retail, and health care.

Mastercard also said on Wednesday that its profit came in lower in the recent quarter. It, however, expressed confidence spending will recover back to pre-virus levels after the Coronavirus restrictions are lifted.

Visa posts a 4% increase in net quarterly income

At £2.46 billion, Visa posted a 4% increase in its net quarterly income as compared to £2.38 billion in the comparable quarter last year. Its net revenue in the second quarter climbed 7% to £4.67 billion that topped the experts’ forecast of £4.59 billion, as per Refinitiv.

Visa was seen roughly 1% down in after-hours trading on Thursday. At £141.48 per share, the company is currently around 7% down year to date in the stock market after recovering more than 30% in a little over a month.

Its performance in 2019, on the contrary, was reported largely upbeat with an annual gain of roughly 40%.

At the time of writing, Visa is valued at £306.21 billion and has a price to earnings ratio of 33.95.