Visa Profit Beats Analysts’ Estimates as Card Spending Increases

Jul 24, 2014 4:09 pm ET

July 24 (Bloomberg) -- Visa Inc., the world’s largest payments network, posted a fiscal third-quarter profit that beat analysts’ estimates as card spending increased.

Net income for the three months 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 Foster City, California-based company said today in a statement. The average estimate of 30 analysts surveyed by Bloomberg was for adjusted profit of $2.10.

Visa is benefiting as consumers globally replace cash with credit and debit cards. Chief Executive Officer Charlie Scharf, 49, has focused on strengthening relationships with retailers, developing technologies to enable digital payments and working with governments to expand the firm’s reach outside the U.S.

“Visa’s business is characterized by recurring revenues, high incremental margins, low capital expenditures and high free cash flow,” Tien-tsin Huang, a JPMorgan Chase & Co. analyst, wrote in a July 23 note. The company is “a relative safe haven against macro uncertainty.”

The shares rose 0.7 percent to $222.74 at 4 p.m. in New York and have gained 0.3 percent this year. MasterCard Inc., the second-largest payments network, has slid 7.2 percent since Dec. 31.

Discover Financial Services, the fourth-largest payments network, said July 22 that profit rose 7 percent to $644 million as card spending increased. American Express Co., the biggest card issuer by purchases, is scheduled to report earnings on July 29, with MasterCard following two days later.

Russia Tensions

After the U.S. imposed sanctions against Russia in March, Russian President Vladimir Putin recommended his country create its own payments system. Visa -- which generates about 2 percent of its revenue from Russia -- said the tensions may trim “several pennies” from this year’s earnings.

The company this month introduced Visa Checkout, which it said will allow consumers to make purchases faster online. The product replaces V.me, a digital wallet that Scharf described as “not friendly” for clients in a May conference call.

“Visa is late to the quick checkout game,” Huang said in a July 16 research note. “But it is one of only a few companies that could establish critical mass given its payment share, marketing budget and brand equity.”