BOSTON - Visa Inc. said Wednesday its first-quarter profit rose by 35 per cent as the shift from cash toward electronic payments maintained its staying power, even while consumers tightened spending amid the recession.
The results beat Wall Street expectations, and shares of Visa rose nearly eight per cent after the regular trading session. Visa also reiterated expectations for earnings growth of more than 20 per cent for its current financial year, even though it scaled back its revenue forecast, warning of slower growth in the spring and summer.
The world's largest electronic payment network reported net income of US$574 million, or 74 cents per share, for the three months ended Dec. 31. That's up from $424 million, or 55 cents per share, in the same quarter a year earlier, when Visa was privately held before its initial public offering last March.
Excluding several one-time charges and gains, Visa earned $599 million, or 78 cents per share, in the latest quarter.
Analysts surveyed by Thomson Reuters, whose estimates typically exclude one-time items, had forecast a profit in the latest quarter of 66 cents per share, on average.
San Francisco-based Visa said its revenue rose 17 per cent to nearly $1.74 billion from $1.49 billion, while operating expenses fell nearly 5 per cent to $773 million from $810 million.
In aftermarket trading, Visa shares rose $3.67, or about 7.5 per cent, to $52.80, from their close in the regular session at $49.13.
The market apparently was reacting to Visa's solid results despite sales erosion for retailers, Cowen & Co. analyst Moshe Katri said.
"I think a lot of people looked at the retail headlines, and were assuming there will be an impact on Visa's results," Katri said. "What is fuelling their growth is the move from cash to cards, and that is holding up relatively well in the recession."
Visa's payments volume jumped 12 per cent over the year-ago period to $701 billion. That operational result was included in the fourth-quarter report but released on a three-month lag, based on activity in the three months ended Sept. 30.
Total cards carrying the Visa brand rose 10 per cent globally to 1.7 billion, and total payment transactions jumped 13 per cent to 14.5 billion.
"In spite of the ongoing challenges with the economy, we began our fiscal 2009 with solid results across the board," Joseph Saunders, chairman and chief executive, told analysts in a conference call.
Saunders said he expects the company's recent success in cutting expenses - including its marketing expenses - will help the company achieve its previous goal of boosting its fiscal 2009 full-year profit by more than 20 per cent.
Analysts expect a 2009 financial year profit of $2.62 per share, up 16 per cent from a year earlier.
Visa had previously forecast 2009 financial year revenue would rise between 11 per cent to 15 per cent. But the company now expects growth in the high single digits in percentage terms.
The economy "will continue to have an effect on dollar payment volumes in the U.S. and internationally for at least the next two to three quarters," Saunders said.
Chief financial officer Byron Pollitt told analysts that Visa was seeing greater debit card use offset slowing growth rates for credit cards as consumers spend more conservatively amid the recession. They're also spending less per transaction, but Visa continues to see solid growth in transactions.
The latest period was Visa's third full quarter as a public company. Visa went public in March in the biggest U.S. IPO ever. The launch came just as the U.S. economy fell deeper into a recession that is turning out to be longer-lasting and more far-reaching than most analysts had expected.
Based on Wednesday's closing price, Visa's shares are down about 13 per cent from their $56.50 closing price the day of the company's March 19 IPO - a far better performance over that period than the broader market, especially from financial services companies. But the stock is off 15 per cent from a recent high of $57.98 on Jan. 6 as bad news from banks has hurt the market's view of Visa.