On Jun 10, we reiterated our Neutral recommendation on
) based on its steady growth momentum, partially offset by higher
expenses and intense market competition. The company's long-term
growth is pegged at 17.4%, higher than the peer group average of
Why the Retention?
Estimates for Visa have been experiencing a steady rising
trend since the global payment processor announced its fiscal
second-quarter 2013 results on May 1. The company's earnings per
share (EPS) and operating revenues of $1.92 and $2.96 billion
exceeded the Zacks Consensus Estimate of $1.81 and $2.85 billion,
respectively. Both the top- and bottom line also outperformed the
Results reflected better pricing and higher spending that
drove the number of processed transactions along with higher
cross-border volumes. However, escalated operating expenses and
cash outflow partly mitigated growth. Nevertheless, a debt-free
balance sheet and raised earnings outlook for fiscal 2013 inject
confidence for efficient capital deployment in the future.
Following the release of the fiscal second-quarter results,
the Zacks Consensus Estimate for 2013 edged up 1.8% to $7.47 per
share in the last 60 days. Moreover, the Zacks Consensus Estimate
for 2014 grew 2% to $8.67 a share. Further, Visa witnessed about
21 positive estimate revisions during the last 60 days, while no
downward revision was experienced. With the Zacks Consensus
Estimate for both 2013 and 2014 exhibiting slight upward pressure
on the stock in the near term, the company now has a Zacks Rank
While intense global competition coupled with sluggish
interest rate environment and currency fluctuations deter the
desired upside in the stock, Visa's growth is sustained by its
consistent credit quality and focus on a diversified business mix
and technology upgrades. Strong alliances and acquisitions also
bode well for long-term growth.
Other Financial Stocks That Warrant a Look
While we maintain a neutral stance on Visa in the near term,
other stocks in the financial sector that are outperforming
Investment Technology Group Inc.
XL Group Plc
Fleetcor Tech Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
FLEETCOR TECH (FLT): Free Stock Analysis
INVEST TECH-NEW (ITG): Free Stock Analysis
VISA INC-A (V): Free Stock Analysis Report
XL GROUP PLC (XL): Free Stock Analysis Report
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