) fiscal first-quarter 2012 (ended December 31, 2011) operating
earnings of $1.49 per Class A common share were triple pennies
ahead of the Zacks Consensus Estimate. Results also substantially
exceeded $1.23 per share reported in the year-ago quarter,
primarily based on lower share count.
Visa's GAAP net income for the quarter stood at $1.03 billion,
climbing 16.4% from $884 million in the year-ago quarter. Besides,
operating income escalated 18.4% year over year to $1.62 billion.
Meanwhile, total GAAP operating expenses rose 6.5% year over year
to $929 million, whereas the effective tax rate was 36% in the
Alongside, total operating revenues for the reported quarter
were $2.55 billion, up 13.8% from $2.24 billion in the year-ago
quarter and the Zacks Consensus Estimate of $2.47 billion. While
growth was driven by strong performance across all segments,
currency fluctuations contributed a positive 1% to the top
Service revenues increased 14.2% year over year to $1.15 billion
and are recognized based on payments volume in the prior quarter.
All other revenue categories are recognized based on current
quarter activity. Data processing revenues improved 12.7% over the
prior-year period to $951 million.
Besides, International transaction revenues, driven by
cross-border payments volume, grew 18.7% over the prior-year
quarter to $748 million. Other revenues, earned through Visa
Europe's licensing fee, were $178 million, climbing 10.6% over the
year-ago quarter. Client incentives, which are a contra-revenue
item, were $481 million, representing 15.9% of gross revenues.
On a constant dollar basis, payments volume increased 11% year
over year to $994 billion. Total processed transactions carrying
the Visa brand increased 8% year over year to 13.6 billion. Cross
border volume, on a constant dollar basis, grew 13% year over
As of December 31, 2011, cash and cash equivalents, restricted
cash and available-for-sale investment securities totaled $7.9
billion, up from $6.9 billion as of September 30, 2011, including
$4.4 billion of restricted cash for litigation escrow.
Nevertheless, long-term debt remained nil.
Total shareholders' equity was recorded at $27.3 billion, up
from $26.4 billion as of September 30, 2011. Besides, Visa's
operating cash flow surged to $1.29 billion in the reported quarter
from $1.0 billion as of December 31, 2010.
Share Repurchase Update
During the reported quarter, Visa reduced its total as-converted
class A common stock by 16.2 million shares, which was funded from
$1.6 billion of operating cash on hand. Besides, the company
repurchased class A common stock worth $75 million, through open
market operations, which was included in $1.6 billion.
Moreover, Visa deposited $1.57 billion from operating cash into
the litigation escrow account previously established under the
retrospective responsibility plan. This deposit has the same
economic effect on earnings per share as repurchasing the company's
class A common stock as it reduces the as-converted class B common
stock share count.
Concurrently, the board of Visa also authorized a new $500
million class A share repurchase program, slated to expire by
February 1, 2013.
Previously, in October 2011, the company had also sanctioned a
new $1 billion class A share repurchase program, which is expected
to expire on July 20, 2012.
Visa also revised its financial outlook for fiscal 2012, now
anticipating annual net revenue growth to be in the low
double-digits range, higher than prior high single-digit to low
double-digits range. Besides, annual earnings per share growth are
now estimated to grow in the high teens from the prior
middle-to-high teens range.
However, Visa reiterated other financial projections for 2012.
The company continues to estimate annual operating margin of about
60%, capital expenditure within $350-400 million and annual free
cash flow of over $4 billion.
Further, the company expects client incentives within the range
of 17-18% of gross revenue and marketing expenses to be less than
$1.0 billion. While GAAP tax rate within 30-31%, adjusted tax rate
is projected within 33-34%.
Concurrently, the board of Visa declared a quarterly dividend of
22 cents per share of class A common stock payable on March 6,
2012, to the company's Class A, Class B and Class C common
shareholders of record as on February 17, 2012.
Besides, on December 6, 2011, the board of Visa declared a
quarterly dividend of 22 cents per share to its respective common
shareholders of record as on November 18, 2011. This marked a 47%
hike from the prior dividend payout of 15 cents per share.
Visa continues to drive growth through increased payment volumes
along with consistent growth in processed transactions. The company
benefits from strong secular demand growth, meaningful
international exposure, high barriers to entry, excellent pricing
power and impressive operating leverage.
Although regulatory compliances as a result of the ongoing
financial overhaul in the U.S. and litigation are expected to weigh
on the financials of the company in fiscal 2012, Visa aims to
retain its strength by exploring newer growth avenues that include
mobile, eCommerce and money transfer services. The company is also
generating strong cash flow and maintains a healthy capital
Last week, Visa's prime peer,
), reported fourth-quarter 2011 operating earnings per share of
$4.03, which came in substantially ahead of the Zacks Consensus
Estimate of $3.90 and $3.16 in the year-ago quarter. Net income for
the reported quarter stood at $515 million, spiking 23.7% from $415
million in the prior-year quarter.
Results for the reported quarter improved over the prior-year
quarter primarily due to better pricing, an increased number of
processed transactions and strong gross dollar value (
) growth. However, a higher tax rate and operating expenses along
with the merchant litigation expense were the downsides.
MASTERCARD INC (
): Free Stock Analysis Report
VISA INC-A (
): Free Stock Analysis Report
To read this article on Zacks.com click here.