Wednesday, July 27, 2011

Visa Inc. (NYSE: V): Q3 Earnings Preview 2011

Visa Inc. (NYSE: V), the world’s largest electronic payments network, is scheduled to release its fiscal third-quarter earnings after the closing bell on Wednesday, July 27, 2011. Analysts, on average, expect the company to report earnings of $1.23 per share on revenue of $2.30 billion. In the year ago quarter, the company reported earnings of $0.97 per share on revenue of $2.03 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 first quarter, the San Francisco, California-based company's net income was $881 million, or $1.23 per class A common share, compare to $713 million, or 97 cents per class A common share, in the year-ago quarter. Net operating revenue climbed 15% to $2.2 billion. Analysts, on average, expected the company to report earnings of $1.20 per share on revenue of $2.23 billion.

Early in July, Visa reaffirmed its financial forecast through 2011 with annual earnings per class A share growth of greater than 20 percent, and annual net revenue growth of 11 percent to 15 percent. For the current year, Visa's forecast translates to revenue of between $8.95 billion and $9.11 billion and earnings of at least $4.84 per share. However, the company warned that its revenue and earnings growth will slow in 2012 after new regulations on the fees banks can charge for debit card transactions kick in. Next year. Visa said it expects its revenue growth to slow to the high-single-digit to low-double-digit range. The company expects earnings-per-share growth to slow to the mid-to-high teens. The slowdown will reflect the rules announced by the Federal Reserve last week that kick in on Oct. 1 and next April. The first will limit the fees that banks can charge retailers for processing debit card transactions. The second will give merchants the power to decide which network handles their transactions. Because Visa's fiscal year ends in September it was able to keep its forecast for the current year. Since the Fed moved the date the fee cap will kick in from July 21 to Oct. 1, it will have no impact on Visa's results for fiscal 2011. U.S. debit revenue accounts for about 20 percent of the company's overall revenue, CEO Joseph Saunders said during a conference call to discuss the forecast. We expect that fiscal 2012 will bear the weight of the regulations financially and in fiscal 2013 revenue growth will regain momentum," Saunders said during the conference call. The company also said it will elaborate further on the impact of the fee cap in its earnings conference call on July 27.

On the bright side, 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.

Full Disclosure: None.
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