Tuesday, October 26, 2010

Visa Inc. (NYSE: V): Q4 Earnings Preview 2010

Visa Inc. (NYSE: V), the world’s largest electronic payments network, is scheduled to release its fiscal fourth-quarter earnings after the closing bell on Wednesday, October 27, 2010. Analysts, on average, expect the company to report earnings of 95 cents per share on revenue of $2.09 billion. In the year ago quarter, the company reported earnings of 74 cents per share on revenue of $1.88 billion.

Visa Inc. operates retail electronic payments network worldwide. It facilitates commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses, and government entities. The company owns and operates VisaNet, a global processing platform that provides transaction processing services, primarily authorization, clearing, and settlement, as well as related value-added services.

In the preceding fiscal fourth quarter, the San Francisco, California-based company's net income was $716 million, or 97 cents per class A common share, compared to $729 million, or 96 cents per class A common share, in the year-earlier quarter. Net operating revenue grew 23% to $2 billion. Analysts, on average, expected the company to report earnings of 93 cents per share on revenue of $1.97 billion.

At its last earnings call in July, the company said that it continues to expect revenue growth at the high end of the 11% to 15% in its fiscal year 2010, and earnings per share growth of 20 percent or higher. It expects earnings per class A share growth to be greater than 20% through 2010 and 2011.

The company continues to benefit from strong secular demand growth, increased payment volumes, meaningful international exposure, high barriers to entry, excellent pricing power, impressive operating leverage, and consistent growth in processed transactions.

However, uncertainty stemming from financial overhaul, which includes curbs on debit-card transaction fees, has taken some shine off Visa's shares. However, the company does not anticipates any impact in fiscal year 2010. The company expects that the impact will be modest and contained to its fourth fiscal quarter 2011.

Looking ahead, the company expects most of its growth to come from outside the U.S. borders regardless of the domestic environment. Today,non-U.S. revenues make up approximately 40% of its business, and one of its stated 2015 goals is to generate half of its revenues from operations in the rest of the world.

The company's stock currently trades at a forward P/E (fye 30-Sep-11) of 17.05 and PEG ratio (5 yr expected) of 1.04. In terms of stock performance, Visa shares have lost nearly 9 percent since the beginning of the year.

Full Disclosure: None.
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