Visa Profit Tops Estimates as Customer Card Spending Rises

  • Revenue climbs 5.4% to $3.57 billion, while expenses rise 2.2%
  • Scharf says `headwinds do not appear to be abating' short-term

Visa Inc., the world’s largest payments network, posted fiscal first-quarter profit that beat analysts’ estimates as consumer card spending increased.

Net income climbed 24 percent to $1.94 billion in the period that ended Dec. 31, compared with a year earlier, the company said Thursday. Adjusted profit, which excludes some one-time items, was 69 cents a share, compared with the 68-cent average estimate of 32 analysts surveyed by Bloomberg.

Chief Executive Officer Charlie Scharf is investing in technology aimed at accelerating digital payments, and striking deals with retailers like Costco Wholesale Corp. as consumers demand better reward programs. The firm in November agreed to buy Visa Europe Ltd. in a transaction valued at as much as 21.2 billion euros ($23.2 billion) to unify the brand globally after eight years as separate companies.

“We continue to be pleased with our financial performance given the uneven global economy and the ongoing negative effects of the strong U.S. dollar,” Scharf, 50, said in the statement. “While these headwinds do not appear to be abating in the short-term as we had hoped, the fundamentals of our business remain strong.”

‘Increased Caution’

Visa slid 11 percent this year through Thursday’s close of regular trading, compared with a 7.4 percent decline of the Standard & Poor’s 500 Index. While its earnings initially sent the stock up during extended trading in New York, the shares were down 1.7 percent by 6:45 p.m.

Executives reiterated guidance for 2016 on a conference call with analysts but signaled “increased caution,” Jason Kupferberg at Jefferies Group wrote in a note to clients. Challenges include weakening economies abroad and the strong dollar. Visa plans to update its forecasts after completing the takeover in Europe.

Revenue in the quarter rose 5.4 percent to $3.57 billion, compared with analysts’ estimates of $3.61 billion. Operating expenses climbed 2.2 percent to $1.17 billion. Payments volume advanced 4.8 percent to $1.31 trillion, fueled by growth in the U.S. and Asia. Cross-border volume, a measure of spending abroad, climbed 4 percent, the company said.

The purchase of Visa Europe ends years of speculation among analysts about whether the companies, which split in 2007 ahead of the U.S. firm’s initial public offering, would reunite. The lack of meaningful contributions to earnings from Europe has long been seen as a weakness for Visa and an advantage for smaller competitor MasterCard Inc., which owns its European business.

Visa will replace American Express Co. in March as the exclusive card network accepted by Costco at its U.S. stores. The relationship has accounted for 20 percent of AmEx’s worldwide loans and 8 percent of customer spending.

American Express, the biggest credit-card issuer by purchases, said last week that fourth-quarter profit fell 38 percent to $899 million as expenses rose and the company took a restructuring charge. Discover Financial Services on Wednesday posted net income and revenue that missed analysts’ estimates as card loan growth was at the low end of the company’s forecast. MasterCard Inc., the second-largest payments networks, reports results Friday.

Before it's here, it's on the Bloomberg Terminal.