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Visa (V) is getting declined today after the credit card and payment processing company posted Q3 results that were mostly in line with analysts' expectations. The problem, though, is that investors have become accustomed to the company comfortably exceeding EPS and revenue estimates, making Visa's performance in Q3 seem like a step in the wrong direction. Indeed, payment volume growth did slow a bit to 7% from 8% last quarter, reflecting the persistent macroeconomic headwinds in the U.S. and China.

• On July 19, competitor American Express (AXP) also reported disappointing quarterly results, falling short of revenue expectations, providing a red flag ahead of Visa's results. The top-line miss was especially notable since AXP caters to a more affluent customer base, making it less vulnerable to softening consumer spending trends.
  • As such, it's not overly surprising that Visa also slightly missed revenue estimates, nor that rival Mastercard (MA) is selling off in sympathy today with Visa as its earnings report approaches on July 31.
• Perhaps more so that the small top-line miss, Visa's update on current business trends is likely weighing more heavily on the stock. During the earnings call, the company disclosed that U.S. payments volume was up by just 4% so far in July (through July 21) with the slight deceleration driven by weather, the timing of promotional shopping events, and the technology outage.
  • Furthermore, cross-border volume growth also slowed to 13% compared to 14% in Q3 with travel-related volume growth tapering off. In particular, outbound travel in the Asia Pacific region has weakened recently.
• Despite the more challenging environment, Visa did reaffirm its FY24 net revenue guidance for low-double-digit growth. To achieve that outlook, Visa will need to achieve its Q4 forecast of low-double-digit growth, which would mark an improvement from Q3's growth of 9.6%.
  • Given the deceleration in payment volume growth trends, there is likely some uncertainty surrounding whether Visa will meet its forecasts, as illustrated by the stock's selloff.

The main takeaway is that while Visa's results were generally stable, they didn't quite stack up to the company's recent performances as sluggish discretionary spending took a toll.