Visa Inc., the biggest component in the Dow Jones Industrial Average, fell the most in three months after reducing its revenue forecast for the rest of the fiscal year.
Visa slid 4.5 percent to $212.71 at 10:31 a.m. in New York after dropping as much as 5.1 percent, the most intraday since April 25 and the worst performance in the 30-company Dow, which declined 0.6 percent.
Revenue for the fiscal year ending Sept. 30 may climb 9 percent to 10 percent from a year earlier, Visa said yesterday in a statement. That’s down from an April forecast of 10 percent to 11 percent, in part because of results in regions beset by military conflict such as Russia, Ukraine and the Middle East, said Chief Executive Officer Charlie Scharf, also citing weakness in China, Argentina and Venezuela.
“The strong U.S. dollar and the tepid growth from the cross-border payment volume in these specific geographies was what we expected,” Scharf, 49, said in a conference call with analysts. “These headwinds we do not feel are permanent.”
Visa, the world’s biggest payments network, said net income for the quarter ended June 30 rose 11 percent to $1.36 billion, or $2.17 a share, from $1.23 billion, or $1.88, a year earlier. The average estimate of 30 analysts surveyed by Bloomberg was $2.10 a share.
Operating revenue increased 5.1 percent to $3.16 billion from a year earlier while expenses fell 3.2 percent to $1.14 billion, according to Foster City, California-based Visa. Card spending rose 11 percent to $1.2 trillion.
Tien-tsin Huang, an analyst at JPMorgan Chase & Co., trimmed his 2015 revenue growth estimates today to 9 percent from 10 percent, citing lost processing revenues in Russia and slower cross-border spending. Scharf said yesterday that Visa expects to lose $50 million in Russian revenue next year amid possible changes to the country’s payments laws.
After the U.S. imposed sanctions against Russia in March, President Vladimir Putin recommended his country create its own payments system. Visa, which generates about 2 percent of its revenue from Russia, has said the tensions may trim “several pennies” from this year’s earnings.
“The bigger factor appears to be lower volatility in FX currency pairs, which reduces the spread that Visa earns on cross-border transactions,” said Christopher Donat, an analyst at Sandler O’Neill & Partners LP. “While management views this as a short-term headwind, we are concerned that it might be related to secular and structural changes in the FX market.”
MasterCard Inc., the second-biggest U.S. payments network, and No. 3 American Express Co., which is also the nation’s largest credit-card lender by purchases, are scheduled to report quarterly results next week. Shares of both firms fell today, with MasterCard dropping 2.4 percent and AmEx sliding 1.1 percent.