Visa Says Quarterly Profit Rises, Sets $1 Billion Buyback Plan
Visa Reports Fourth-Quarter Adjusted Profit of 95 Cents
Daniel Acker/Bloomberg
Visa Inc. reported fourth-quarter adjusted profit of 95 cents a share.
Visa Inc. reported fourth-quarter adjusted profit of 95 cents a share. Photographer: Daniel Acker/Bloomberg
Visa Inc., the world’s biggest payments network, fell the most in more than three months after the company logged a quarterly profit that matched analysts’ estimates and said it may spend $1 billion to buy back shares.
Visa, which had beaten estimates in the prior 10 quarters, fell 4.3 percent to $76.45 at 4:15 p.m. today in New York Stock Exchange composite trading, the steepest drop since July 16.
Chief Executive Officer Joseph W. Saunders is repurchasing shares and boosting dividends as lawmakers, litigators and regulators challenge the company’s fees and rules. Visa is awaiting word from the Federal Reserve on how the central bank will interpret Congress’s mandate to regulate debit-card fees and earlier this month settled a U.S. antitrust lawsuit.
“While there are challenges to address, we remain confident in our ability to adapt to the changing environment,” Saunders, 64, said in a conference call with analysts after San Francisco-based Visa reported earnings yesterday.
Fiscal fourth-quarter net income rose 51 percent to $774 million, or $1.06 a share, from $514 million, or 69 cents, in the same period last year, Visa said in a statement. Adjusted earnings per share, which excluded the revaluation of the company’s Visa Europe Ltd. put option, were 95 cents, meeting the estimate of 30 analysts surveyed by Bloomberg.
Total operating revenue rose 13 percent to $2.1 billion in the period ending Sept. 30. Visa expects net revenue growth of 11 percent to 15 percent for fiscal 2011, earnings per share to rise more than 20 percent and free cash flow of more than $3 billion, Saunders said.
Debt Caps
The debit caps, set to take effect in July, won’t affect Visa’s results until the fiscal fourth quarter of 2011, the company said. The Fed may propose the rules by year-end.
“When the Fed is more explicit about rulemaking, then we will be able to have a more informed discussion and more informed guidance,” Chief Financial Officer Byron Pollitt said during the conference call.
Transactions processed by Visa in the fourth quarter jumped 16 percent on an annualized basis to 12.1 billion, as spending on credit and debit cards totaled $828 billion, a 14 percent increase from a year earlier when adjusted for currency fluctuations, the company said. Cross-border volumes climbed 16 percent, it said.
Regulatory Measures
Visa and No. 2 network MasterCard Inc. settled the Justice Department’s lawsuit Oct. 4 as the U.S. challenged company contracts that barred retailers from steering customers to cheaper card brands and alternative payment forms. American Express Co. is fighting the complaint. A separate antitrust case brought by merchants against Visa and Purchase, New York-based MasterCard is pending in federal court in Brooklyn, New York.
The stocks of both networks declined earlier this year as Congress included caps on debit-card interchange, or “swipe,” fees, in the Dodd-Frank financial-regulatory overhaul. Visa and MasterCard, which set the fees and pass the money to card- issuing banks, may face pressure from lenders during contract negotiations. Bank of America Corp. has said the debit caps may trim annual interchange revenue by as much as $2.3 billion.
The contracts, Visa’s biggest revenue source, generated $912 million in the fourth quarter, a 13 percent increase from the year-earlier period, Visa said.
The company renewed “several” client contracts during the fourth quarter and inked an early renewal of “a major relationship that now leaves us with no major renewals until the beginning of fiscal 2013,” Saunders said.
CyberSource
The quarterly results included Visa’s $2 billion acquisition in July of CyberSource Corp., which helps merchants accept payments online. Billable transactions processed on CyberSource’s network surged 36 percent in the quarter to 829 million. CyberSource contributed $41 million in revenue in the period, Visa said.
Visa booked a $79 million noncash charge tied to the fair value of the Visa Europe put option.
The contract, if exercised, “will require us to purchase all of Visa Europe’s outstanding capital stock from its members,” Visa Inc. said in its 2009 annual report. “We will incur a substantial financial obligation if Visa Europe exercises the put option, which it may do at any time.”
Visa completed an earlier $1 billion stock repurchase in the fourth quarter, buying 12.9 million shares in the full fiscal year. The new plan runs through Sept. 30, 2011.
MasterCard, which is scheduled to report third-quarter results on Nov. 2, fell 2.5 percent to $239.52, the most in more than a month.
To contact the reporter on this story: Peter Eichenbaum in New York at peichenbaum@bloomberg.net
To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net
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