Visa Posts Profit, Shares Rise as Spending Rebounds
October 30th 2009 03:52
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Oct. 28 (Bloomberg) -- Visa Inc., the world’s biggest payments network, set a new 52-week high in New York trading after posting results that exceeded most analysts’ forecasts and saying a yearlong skid in consumer spending has ended.
Net income for the fiscal fourth quarter ended Sept. 30 was $514 million, or 69 cents a diluted share, compared with a year- earlier loss of $356 million, or 45 cents, tied to the settlement of an antitrust lawsuit, the San Francisco-based company said yesterday in a statement. Adjusted income, which excludes one-time items, was 74 cents a share, 2 cents higher than the average estimate of 26 analysts surveyed by Bloomberg.
The shift toward a cashless society, fueled by a growing preference for debit cards, helped Visa and No. 2 payment processor MasterCard Inc. ride out the recession even as the U.S. unemployment rate neared 10 percent. Both companies fared better than banks that issue their cards because networks don’t make loans, insulating them from record defaults. Visa may spend up to $1 billion on a stock buyback, which runs until Sept. 30.
“While the U.S. and the rest of the world are still picking themselves up from the economic storm of the past year, we are beginning to see some very early signs of stabilization and some positive trends in aggregate payment volume,” Chief Executive Officer Joseph Saunders said in a conference call with analysts.
Visa advanced $2.67, or 3.6 percent, to $76.57 at 4:15 p.m. in New York Stock Exchange composite trading, and advanced as high as $78.02, the highest since July 30, 2008. The shares have gained 46 percent this year.
‘Solid’ Improvement
U.S. payment volume, a measure of total spending on Visa’s network, slid 1 percent in the quarter, a “solid” improvement from the 3 percent decline in the quarter ended June 30, Chief Financial Officer Byron Pollitt said on the conference call. U.S. spending grew 1 percent in the final month of the quarter and 3 percent in the first three weeks of October, the first positive growth in a year, he said.
“While we draw some encouragement from this data, it is still not enough for us to call an inflection point in the U.S. economy,” Pollitt said.
Visa said annual net revenue growth in 2010 will be at the lower end of the 11 percent to 15 percent range, with earnings per share growth exceeding 20 percent for the Class A common shares.
Quarterly operating revenue increased 10 percent to $1.88 billion, exceeding the $1.79 billion average forecast of analysts surveyed by Bloomberg. Transactions processed on Visa’s network climbed 9 percent to 10.5 billion. Operating expenses fell 53 percent to $1.01 billion, from $2.15 billion.
Income Tripled
For the full year, net income almost tripled to $2.35 billion in the fiscal year ended Sept. 30, from $804 million last year. Operating revenue rose 10 percent to $6.91 billion.
Credit, charge, debit and other cards will account for 54 percent of U.S. purchase transactions by 2012, compared with less than half in 2007, according to the Nilson Report, an industry newsletter based in Carpinteria, California.
“Visa’s revenue and earnings should rise steadily as a result of the continued migration of consumer spending from cash and checks to electronic payments,” Buckingham Research Group analyst David Hochstim said in an Oct. 26 note to investors.
Banks such as JPMorgan Chase & Co. and Citigroup Inc. have cut off some credit-card accounts to curb defaults, pushing more consumers toward debit cards, which deduct money electronically from a user’s checking account. Visa collects processing fees regardless of the payment method. Debit comprises about 70 percent of Visa’s U.S. transactions and the value of debit payments surpassed credit cards for the first time in the last three months of 2008, the company said previously.
Higher Fees
The company added a transaction processing fee of almost 2 cents on July 1 that, coupled with other fee increases, could generate $500 million in annualized gross revenue, according to JPMorgan analyst Tien-tsin Huang.
“The recent improvement in U.S. payment volume trends for Visa was a little better than we had expected and has positive implications for MasterCard,” Huang said today in a research note. He rates Visa “overweight” with a $94 price target by the end of 2010.
MasterCard plans to report third-quarter results on Nov. 3.
To contact the reporter on this story: Peter Eichenbaum in New York at peichenbaum@bloomberg.net
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