Visa (NYSE:V) is scheduled to announce its earnings on April 29. According to consensus estimates, revenues are anticipated to increase by roughly 9% compared to the previous year, reaching $9.55 billion, while adjusted earnings are projected at approximately $2.68 per share, slightly above last year’s figure. This growth is expected to be fueled by increasing payment volumes and higher cross-border volumes, which are generally more profitable. However, investors will pay closer attention to Visa’s outlook. The U.S. economy may encounter several challenges in the near future due to tariffs introduced by President Donald Trump on key trading partners. This situation could significantly affect Visa, considering that its operations are closely linked to consumer spending and international travel volumes.
Visa currently holds a market capitalization of $580 billion. Over the past twelve months, revenue totaled $37 billion, and the company has been operationally profitable, reporting $24 billion in operating profits and a net income of $20 billion. Therefore, for those seeking potential gains with less volatility than specific stocks, the Trefis High Quality portfolio offers a viable alternative, having outperformed the S&P 500 and achieved returns exceeding 91% since its launch.
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Visa’s Historical Odds Of Positive Post-Earnings Return
Here are some insights about one-day (1D) post-earnings returns:
- Over the last five years, there have been 20 earnings data points recorded, with 10 positive and 10 negative one-day (1D) returns noted. In summary, positive 1D returns were observed approximately 50% of the time.
- This percentage remains consistent at 50% when examining data from the last 3 years instead of 5.
- The median of the 10 positive returns is 2.6%, while the median of the 10 negative returns is -1.7%
Additional information regarding observed 5-Day (5D) and 21-Day (21D) returns following earnings is summarized alongside the statistics in the table below.
Correlation Between 1D, 5D, and 21D Historical Returns
A relatively lower-risk strategy (though it may not be effective if the correlation is weak) involves understanding the correlation between short-term and medium-term returns after earnings, identifying pairs with the strongest correlation, and executing the appropriate trades. For example, if 1D and 5D demonstrate the highest correlation, a trader could take a “long” position for the next 5 days if the 1D post-earnings return is positive. Below is some correlation data based on a 5-year and a 3-year (more recent) history. Please note that the correlation 1D_5D refers to the correlation between 1D post-earnings returns and the following 5D returns.
Is There Any Correlation With Peer Earnings?
Post-earnings stock reaction can sometimes be influenced by peer performance, and this pricing-in might even start before the announcement. Below is historical data comparing Visa stock’s past post-earnings one-day (1D) returns with the 1D post-earnings returns of peers that reported just prior to Visa, allowing for a fair comparison.
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