Expanded Mobile Services and Strong Earnings Signal a Promising 2013 for Visa

Michael Teague |

Visa (V) reported net income for the first quarter was $1.27 billion, $1.92 per share, on revenue of $2.96 billion, against the prior-year period during which Visa netted $1.29 billion or $1.91 per share on revenue of $2.58 billion.

An average of analyst forecasts had projected the company’s earnings at $1.81 per share on revenue of $2.85 billion.

The world’s largest credit and debit card operator explain the earnings beat by pointing to a 10 percent increase in service revenue, a 25 percent increase in data processing revenue, and a 13 percent increase in transaction revenues.

The above figures are important because the company brings in its revenue from transaction processing fees, and thus any increase must be considered as bearing some relationship to increases in consumer spending.

While Visa processed $255 billion in credit card charges in the United States, a 9 percent increase on the prior year period, debit charges remained largely the same. A heavier consumer reliance on credit during the quarter would seem to be in keeping with confidence levels that have consistently polled at lower rates since the beginning of the year, particularly due to the expiration of payroll tax cuts dating back to the previous administration, as well as automatic government spending cuts that kicked in at the beginning of March.

Furthermore, with more and more users doing just about everything including shopping and making purchases from tablets and phones rather than personal computers, the company has made aggressive moves to create a space for itself in the world of mobile payments.

For instance, Q1 saw Visa partnering with JPMorgan Chase & Co. (JPM) to create a payment processing platform that would offer certain discounts to qualifying cardholders. Visa also reached a deal with the mobile commerce company ROAM that would allow businesses to take accept payments from mobile devices.

The company also revised its guidance for fiscal 2013 earnings growth to 20 percent.

While the company had dropped nearly 1.5 percent in regular trading on Wednesday, closing at $166, the earnings report caused some excitement among investors in after hours, sending shares up 2.11 percent to $169.52.

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Symbol Name Price Change % Volume
BG Bunge Limited 59.87 -0.19 -0.32 1,059,020
JPM JP Morgan Chase 68.26 -0.09 -0.13 14,106,303
V Visa Inc. 82.50 -0.31 -0.37 6,938,358


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