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Visa Beats Q2 Earnings on Higher Revenue, Guidance Intact - Analyst Blog

Visa Inc . V posted second-quarter fiscal 2015 (ended Mar 31) operating earnings per Class A common share of 63 cents, beating the Zacks Consensus Estimate by a penny. With this, the company kept its earnings streak alive for six trailing quarters. Bottom line improved a dime year over year.

Behind the Headlines

Total operating revenue for the reported quarter was $3.4 billion, up 7.8% year over year and ahead of the Zacks Consensus Estimate of $3.3 billion. On a constant currency basis, revenues grew 10% from the year-ago period. The upside was driven by solid service revenues, data processing and international transaction revenues.

Service revenues increased 8% year over year to $1.6 billion and are recognized on payments volume in the prior quarter. All other revenue categories are recognized on current-quarter activity. Data processing revenues grew 9% from the prior-year quarter to $1.3 billion.

Additionally, International transaction revenues, which are driven by cross-border payments volume, rose 11% from the prior-year quarter to $964 million. Other revenues, earned through Visa Europe's licensing fee, were $204 million, up 12% from the year-ago quarter. Client incentives, is a contra-revenue item, came in at $676 million, and accounted for 16.5% of gross revenues.

On a constant dollar basis, payments volume expanded 11% year over year to $1.2 trillion. Total processed transactions carrying the VisaNet brand increased 11% year over year to 17 billion. Cross-border volume, on a constant dollar basis, grew 8% from the prior-year quarter.

Meanwhile, total operating expenses rose 1% year over year to $1.1 billion, due to higher personnel, depreciation-amortization and general-administrative expenses. However, Visa's reported operating income climbed 11.4% year over year to $2.3 billion.

Financial Update

As of Mar 31, 2015, cash and cash equivalents amounted to $2.04 billion, up from $1.97 billion as of Sep 30, 2014. Total assets increased to $38.8 billion from $38.7 billion at Sep 30, 2014. Total equity was $28.2 billion, up from $27.4 billion as of Sep 30, 2014.

Further, Visa's operating cash flow was $2.7 billion during the first six months of fiscal 2015, up 21% year over year.

Share Repurchase and Dividend Update

During the reported quarter, Visa repurchased about 16.2 million Class A common shares for a total cost of $1.1 billion and is left with $3.8 billion under the authorization.

On Apr 22, 2015, the board declared a quarterly dividend of 12 cents per share of Class A common stock, paid on Jun 2, to shareholders of record as on May 15.

Guidance

Visa reiterated the financial outlook for fiscal 2015, anticipating annual operating earnings per share to grow in the mid-teens range. Annual net revenue growth is expected at low double digits, with an adverse foreign currency impact of about 2%.

Meanwhile, the company expects annual operating margin in the mid 60% range. Further, Visa expects client incentives within 17.5−18.5% of gross revenue. Additionally, annual free cash flow is estimated to be over $6 billion in fiscal 2015. Tax rate is likely to be in the low-30% band.

Zacks Rank

Visa currently carries a Zacks Rank #3 (Hold).

Performance of other Financial Transaction Service Providers

Other sector players, MasterCard Inc. MA ,Total System Services, Inc. TSS , and Xoom Corporation XOOM have surpassed their respective Zacks Consensus Estimate in the last reported quarter.

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


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

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