Credit card service provider Visa Inc. (V) said Wednesday its profit for the first quarter increased 33% over last year, as consumers increasingly tend to digital currency. The company also benefited from the expansion of its payments network and processing capabilities, which in turn reflected on its transaction growth.
Looking ahead, the company reaffirmed its earnings outlook for fiscal year 2010 and fiscal 2011.
Net income attributable to Visa for the first quarter was $763 million or $1.02 per class A share for the first quarter, up from $574 million or $0.74 per class A share in the prior year quarter.
Excluding items, adjusted net income rose to $737 million or $0.99 per class A share from $599 million or $0.78 per class A share in the year-ago quarter. On average, 29 analysts polled by Thomson Reuters expected the company to report earnings of $0.91 per class A share for the first quarter. Analysts' estimates typically exclude special items.
The San Francisco, California-based company's GAAP net operating revenue increased 13% to $2.0 billion from $1.7 billion in the same quarter last year, due to strong contributions across all revenue categories, in particular data processing revenues and international transaction revenues. Twenty-six analysts had a consensus revenue estimate of $1.92 billion for the first quarter.
Joseph Saunders, chairman and chief executive officer of Visa said, "By all measures, Visa's fiscal first quarter was a strong start to the new year, as we continued to execute well against our business plan."
First quarter service revenues rose 4% to $827 million, while data processing revenues soared 38% to $765 million. International transaction revenues, which are driven by cross-border payments volume, grew 9% to $552 million from the year-ago quarter.
Other revenues, which include the Visa Europe licensing fee, were $190 million, up 21% over the prior year. Volume and support incentives, which are a contra revenue item, were $374 million, which represents 16% of gross revenue.
Payments volume, on a constant basis, grew 2.5% to $720 billion from the previous year quarter. Cross border volume growth, on a constant basis, was positive 2% for the quarter. Total volume, on a constant basis, improved 3% to $1,139 billion for the quarter.
Total processed transactions, which represent transactions processed by VisaNet, grew 12% to 10.9 billion from last year.
Total cards carrying the Visa brands rose 5% worldwide to 1.8 billion over a year ago.
Total operating expenses, on a GAAP basis, decreased 4% to $743 million from $773 million in the first quarter of 2008, as a result of a $41 million pre-tax gain recognized related to the prepayment of the remaining obligations under the Retailers' litigation.
At December 31, 2009, cash, cash equivalents, restricted cash, and available-for-sale investment securities were $6.0 billion.
Last October, Visa's board authorized a $1.0 billion share repurchase plan through September 30, 2010, and is subject to extension or expansion at the determination of Visa's board.
During the first quarter of fiscal 2010, the company repurchased 5.5 million shares at an average price of $78.78 per share for a total cost of $432 million. At the end of the first fiscal quarter, $568 million remained available for repurchase under the existing repurchase authorization.
Looking ahead, Visa continues to expect earnings per class A share growth for fiscal 2010 to be greater than 20%. Net revenue growth is now expected in the range of 11% to 15%. Earlier, the company estimated revenue growth at the lower end of the 11% to 15% range. The Street currently estimates earnings of $3.60 per share on revenue of $7.74 billion for the year.
For fiscal 2011, Visa still expects earnings per class A share growth to be greater than 20%. Analysts are looking for earnings of $4.35 per share for the year 2011.
Among others in the industry, American Express Co. (AXP) reported that its fourth quarter profit more than doubled from last year, helped by the strong performance in the U.S. Card Services division and a sharp decline in loan loss provisions.
Another peer, MasterCard Inc. (MA) is scheduled to release its fourth quarter earnings results on February 4. Analysts project earnings of $2.46 per share on revenue of $1.30 billion for the fourth quarter.
Visa closed Wednesday's regular trading at $83.52, down 49 cents on a volume of 7.98 million shares. In the after-hours, the shares gained $2.39 or 2.86%. The stock has been moving in a range of $48.56 - $89.69 for the past 52 weeks, with an average daily volume of about 6.18 million shares for the past three months.
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