Visa's $20 Billion European Expansion Starts to Bolster Revenue

  • Revenue expected to increase to high end of earlier forecast
  • Visa Europe ‘at or above our expectations,’ CFO Prabhu says

Visa Inc. went to Europe, spent a lot, and has no regrets.

Revenue climbed more than analysts expected in the fiscal second quarter and is expected to increase to the upper end of company’s earlier forecast even as expenses remain elevated on costs tied to its purchase last year of Visa Europe. The payments network spent about $1.5 billion in the period ended March 31 on expenses related to the acquisition, but investors appear to be betting that the pain will be worth the later gain, sending shares higher in extended trading.

“We’re very happy with how Visa Europe has come along,” Chief Financial Officer Vasant Prabhu said on a call with analysts. “It is tracking at our above our expectations.”

Visa has been investing in digital payment technologies and establishing more relationships with retailers to spur the global shift away from cash and checks to electronic payments. The company completed its $20 billion purchase of Visa Europe in June to gain a stronger foothold in that market after the two firms spent eight years as separate entities.

Visa shares rose 2.7 percent to $93.57 at 6:08 p.m. in New York. The stock climbed 17 percent this year through the end of regular trading, outpacing the 12 percent advance of the 69-company S&P 500 Information Technology Index.

Revenue jumped 23 percent to $4.5 billion on gains from its recently acquired European business, Visa said Thursday in a statement, beating the $4.28 billion estimate of 27 analysts surveyed by Bloomberg. Operating expenses rose 40 percent to $1.67 billion, the company said, primarily driven by increases in charitable donations to the newly created Visa Foundation.

Profit Tumbles

Net income fell 75 percent to $430 million, or 18 cents a share, from $1.71 billion, or 71 cents, a year earlier. Excluding costs tied to the Visa Europe reorganization, profit was 86 cents a share, beating analysts’ 79-cent average estimate.

The firm increased its share buyback plan by $5 billion to $7.2 billion, partially to offset dilution from Visa Europe.

Visa lowered its forecast for the full-year, earnings-per-share growth rate to the “high single-digits” from the “low 30s” it previously expected. It raised its expectations for adjusted EPS growth to the “high end of mid-teens” from “mid-teens.”

Global credit- and debit-card spending, including Visa Europe and adjusted for currency fluctuations, increased 37 percent to $1.73 trillion from a year earlier, the company said. Cross-border volume, a measure of customer spending abroad, increased 132 percent.

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