Visa Profit Tops Estimate, Revenue Misses

(RTTNews) - The world's largest payment card processing network Visa Inc (V), Thursday reported a 26 percent jump in second-quarter profit on higher card spending as well as a tax benefit, with earnings topping Wall Street estimates. Revenues, however, came in short of expectations.

For 2014, Visa now expects low double-digit constant revenue growth - in the 10 percent to 11 percent range. Visa shares were down about three percent in after-hours trade on the New York Stock Exchange.

Visa facilitates electronic funds transfers and earns fees for the service. As more consumers switch over to electronic mode of payment, Visa and rival MasterCard Inc (MA) stand to gain.

Under CEO Charlie Scharf, Visa is benefiting from the pickup in the U.S. economy, which accounts for a major part of its business, while it strives to improve its international business, including emerging markets.

Visa's second-quarter service revenues - based on payments volume in the prior quarter - grew 7 percent year-over-year to $1.5 billion. Data processing revenues for the quarter climbed 7 percent to $1.2 billion.

International transaction revenues - led by cross border payments volume - was up 5 percent at $871 million.

Visa's payments volume, on a constant dollar basis, for the quarter climbed 12 percent over the prior year to $1.1 trillion.

The company said it processed 15.4 billion transactions in the quarter, up 11 percent from last year.

Visa reported second-quarter net income of $1.6 billion or $2.52 per Class A share, compared with $1.3 billion or $1.92 per share last year.

Results for the quarter included a tax benefit of $218 million, mostly related to prior periods.

Excluding items, adjusted earnings for the quarter were $2.20 per share. On average, 30 analysts polled by Thomson Reuters expected earnings of $2.18 per share for the quarter. Analysts' estimates typically exclude special items.

The Foster City, California-based company's revenues climbed 7 percent to $3.16 billion from $2.96 billion in the year-ago quarter. Twenty-nine analysts had a consensus revenue estimate of $3.19 billion.

The strengthening of the U.S. dollar impacted net operating revenues by 2 percentage points of negative growth during the quarter. Visa expects the negative impact to be more pronounced in the next quarter.

Visa has been striving to enhance security for card users. In March, Visa and MasterCard agreed to form a working group to address security problems. The group will focus on accelerating the migration of U.S. credit card companies to the more secure EMV chip technology from the current outdated magnetic-strip technology.

Meanwhile Wal-Mart Stores Inc (WMT) last month was reported to have sued Visa for more than $5 billion, claiming the card network, over a period of nine years, charged very high fees when the retailer's customers used its cards.

Among others in the business, Discover Financial Services (DFS) Tuesday reported a decline in first-quarter profit, hurt by loan-loss provisions. Discover, based in Riverwoods, Illinois, posted quarterly net income of $618 million or $1.31 per share, compared with $659 million or $1.33 per share last year. Revenues meanwhile climbed 4 percent to $2.08 billion.

Last week, American Express Co (AXP) reported a 12 percent increase in profit for the first quarter, on higher card spending by its affluent customers.

Visa stock closed Thursday at $209.40, up $0.58 or 0.28%, on a volume of 3.2 million shares on the NYSE. In after hours, the stock dropped $6.41 or 3.06%, to trade at $202.99.