Visa Earnings Soar: Is Plastic Regaining Its Appeal?
In a sign that consumer spending may be on the rebound, Visa (V) on Wednesday posted a fiscal fourth-quarter profit that jumped 51% from the year-ago quarter. The largest U.S. processor of credit-card payments also authorized as much as $1 billion in stock repurchases just one week after boosting its dividend.
But shares fell in extended trading after the company released disappointing guidance for the 2011 fiscal year. Visa forecast its 2011 revenue would range between $8.95 billion and $9.27 billion. The midpoint of the range, approximately $9.11 billion, would miss analyst expectations of $9.19 billion in sales. The stock declined 2.4% to $78 by about 7 p.m. Eastern time.
Visa's fourth-quarter earnings beat Wall Street expectations. Net income for the quarter, which ended Sept. 30, came to $774 million, or $1.06 a share, up from $514 million, or 69 cents, a year earlier. Revenue increased 13% to $2.12 billion. Analysts had expected earnings of 95 cents a share on $2.09 billion in revenue, according to a Thomson Reuters poll.
Visa cardholders spent 14% more on their cards than they did in the same quarter a year earlier, on 16% more transactions. The results were consistent with those of Visa's smaller competitor American Express (AXP), which last week reported its third-quarter profit surged 71% year over year.
"We continue to successfully execute on our strategic initiatives while in the midst of a very challenging business environment," Visa CEO Joseph Saunders said in a statement.
The company's buyback announcement, coming on top of the higher dividend, puts Visa on a long list of companies that have been rewarding shareholders with excess cash. Citigroup's Citi investment research recently predicted that stock buybacks will soon grow toward their 2007 levels, when companies bought back a record 5% of their market capitalization.