Visa Earnings Fare Well, Raises Buyback - Analyst Blog

By
A A A

Visa Inc. 's ( V ) fiscal fourth-quarter 2013 (ended Sep 30, 2013) operating earnings of $1.85 per Class A common share were in line with the Zacks Consensus Estimate but outpaced the prior-year quarter figure of $1.54 per share. Results in the reported quarter included a restructuring reserve of about 4 cents per share.

Net income increased 15.2% to $1.19 billion from $1.04 billion in the year-ago quarter. Including reversal of tax reserves of $627 million or 93 cents per share, reported net income in the year-ago quarter was $1.66 billion or $2.47 per share.

Alongside, total operating revenues for the reported quarter were $2.97 billion, up 8.9% year over year but lagging the Zacks Consensus Estimate of $3.02 billion. Growth was driven by higher card spending and strong performance across all segments.

Service revenues increased 9.6% year over year to $1.39 billion and are recognized based on payments volume in the prior quarter. All other revenue categories are recognized based on the current quarter activity. Data processing revenues grew 11.7% from the prior-year period to $1.19 billion.

Additionally, International transaction revenues, which are driven by cross-border payments volume, rose 12.9% over the prior-year quarter to $899 million. Other revenues, earned through Visa Europe's licensing fee, were $183 million, improving 6.4% from $172 million in the year-ago quarter. Client incentives , which is a contra-revenue item, came in at $680 million, and accounted for 18.6% of gross revenues.

On a constant dollar basis, payment volume increased 13% year over year to $1.1trillion. Total processed transactions carrying the VisaNet brand increased 14% year over year to 15.5 billion. Cross border volume, on a constant dollar basis, grew 11% over the prior-year quarter.

Meanwhile, total operating expenses inched up 1% year over year to $1.22 billion. Consequently, Visa's operating income grew 15% to $1.75 billion, while operating margin rose to 58.9% from 55.7% in the year-ago period.

Full-Year Highlights

For full-year fiscal 2013, Visa reported operating earnings of $7.59 per Class A common share that beat the Zacks Consensus Estimate by a penny. Additionally, the earnings substantially exceeded prior fiscal year's earnings of $6.20 per share. Consequently, operating net income escalated 18.5% year over year to $4.98 billion.

Including extraordinary items, GAAP net income in fiscal 2012 stood at $2.14 billion or $3.16 per share. However, no adjustments were recorded in fiscal 2013.

Alongside, total operating revenues were $11.78 billion, up 13% year over year, although it missed the Zacks Consensus Estimate of $11.82 billion. Total processed transactions carrying the VisaNet brand increased 10% year over year to 58.0 billion. Results were within management's guidance.

Total core operating expenses rose 8.4% year over year to $4.54 million. Operating margin climbed to 61% from 60% in the prior fiscal year. However, GAAP operating margin reduced to 21% in fiscal 2012 owing to GAAP operating expenses of $8.28 billion. Effective tax rate was 31.4% in fiscal 2013 against 32.9% in fiscal 2012.

Financial Update

As of Sep 30, 2013, cash and cash equivalents and available-for-sale investment securities amounted to $4.26 billion, up from $2.82 billion as of Sep 30, 2012. Nevertheless, long-term debt remained nil at fiscal 2013-end, while total assets declined to $35.96 billion from $40.01 billion at fiscal 2012-end. Total equity was $26.87 billion, down from $27.63 billion as of Sep 30, 2012.

Further, Visa's operating cash flow stood at $3.02 billion at the end of fiscal 2013 against $5.01 billion recorded at the end of fiscal 2012.

Stock Update

During the reported quarter, Visa repurchased about 7.0 million class A common shares for a total cost of $1.24 billion, while shares worth $5.34 billion were bought back during fiscal 2013.

Concurrently, the board sanctioned a new share repurchase program worth $5.0 billion. Including $251 million from the current set authorized in Jul 2013, Visa now has $5.25 billion of shares available for repurchases.

Guidance

Visa detailed the financial outlook for fiscal 2014, anticipating annual operating earnings per share to grow in mid-to-high teens range. Annual net revenue growth is expected to be within low double-digits, with an adverse foreign currency impact of about 2%.

Meanwhile, the company affirmed annual operating margin of low-60% range. Further, Visa expects client incentives within 16.5−17.5% of gross revenues. Additionally, annual free cash flow is estimated to be around $5 billion in fiscal 2014.

Dividend Update

On Oct 23, 2013, the board declared a 21.2% hike in its quarterly dividend to 40 cents per share of class A common stock from the prior 33 cents, marking the 5 th consecutive annual dividend increment. Previously, in Oct 2012, the company had raised its dividend by 50%.

The hiked dividend will be paid on Dec 3, 2013, to the company's common shareholders of record as on Nov 15, 2013.

On Sep 4, 2013, Visa paid a quarterly dividend of 33 cents per share to common shareholders of record as on Aug 16, 2013.

Others

On Oct 16, arch rival American Express Co. ( AXP ) reported its third-quarter 2013 operating earnings per share of $1.25. The result comfortably surpassed both the Zacks Consensus Estimate of $1.22 and the year-ago quarter earnings of $1.09 a share. Improved top line and cardmember spending supported growth.

Meanwhile, MasterCard Inc. ( MA ) is slated to release its third-quarter 2013 earnings before the opening bell on Oct 31. Visa along with American Express, MasterCard and peer, Fiserv Inc. ( FISV ), carries a Zacks Rank #2 (Buy).



AMER EXPRESS CO (AXP): Free Stock Analysis Report

FISERV INC (FISV): Free Stock Analysis Report

MASTERCARD INC (MA): Free Stock Analysis Report

VISA INC-A (V): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: AXP , FISV , MA , V

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

75%
100%
93%
64%

Most Active by Volume

79,271,631
  • $14.905 ▼ 1.36%
45,947,178
  • $57.27 ▲ 8.75%
41,265,316
  • $17.06 ▲ 0.29%
39,094,945
  • $3.465 ▼ 2.39%
35,483,188
  • $14.32 ▼ 2.59%
29,993,992
  • $101.20 ▲ 1.09%
23,596,006
  • $4.90 ▼ 1.01%
21,816,125
  • $99.01 ▲ 0.36%
As of 9/30/2014, 01:06 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com