Thursday, February 4, 2010

Visa (V) - The Beat Goes On

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Speaking of oligopolies... the beat goes on for Visa (V) and surely Mastercard (MA) after it reports today.   These are 2 of the hedge fund universe's favorite stocks since coming public [Feb 4, 2008: Visa IPO Seeks Mastercard Riches]  and for very good reason.  Another impressive showing and for now, Visa, with its higher exposure to debit cards, [May 2, 2009: Debit Card Use Overtakes Credit] seems to be the favorite horse - despite the higher valuation (now about 23x forward full year estimates)


Via AP:
  • Visa Inc. on Wednesday said its profit rose 33 percent in the fiscal first-quarter on increased revenue, even as consumers pull back sharply on spending amid the recession.  The payment processing giant reported net income of $763 million, or $1.02 per share, compared with $574 million, or 74 cents per share a year ago.
  • Revenue growth was strong in all segments, climbing 13 percent to $1.96 billion from $1.74 billion a year ago, driven by strong growth in all revenue categories, particularly data processing revenues and international transaction revenues.
  • Analysts surveyed by Thomson Reuters expected 91 cents per share on revenue of $1.92 billion, on average.
  • Visa said payment volume for the period ended Dec. 31 grew 8.5 percent to $769 million.
  • Total cards carrying the Visa brands rose 5 percent worldwide to 1.8 billion, and processed transactions for the three months ended Dec. 31 grew 12 percent to 10.9 billion.
  • Operating expenses fell 4% to $743 million, helped by lower spending on advertising, marketing and other promotional activity.
  • Profit margins reached 62% during the December quarter.

Still a world of opportunity out there for these 2 names as the Brazilians, Chinese, and Indians all must be introduced to the wonderful world of plastic en masse.  Hopefully many choose the convenience of debit rather than what turns into a trap for many... credit.
  • International debit and credit volume rose 40% and 22%, respectively.

Debit continues to outpace credit
  • CEO Joseph Saunders said in a conference call with analysts that the improved results reflect a continued shift to electronic payments, particularly to debit cards, which saw a 17 percent increase in payment volume in the quarter from the year-ago period.
  • Debit transactions now make up 54 percent of total U.S. payment volume, the company said.  Saunders said that is a reflection of increased debit card use by U.S. consumers to pay for fuel and other recurring expenses, which is reflective of economic conditions pushing customers to rely less on credit.

Repurchase Plan
  • Visa said it repurchased 5.5 million shares at an average price of $78.78 for a total of $432 million during the December quarter under the $1 billion buyback authorization it announced in October.

Guidance - steady Eddie:
  • The company said it expects 2010 revenue growth between 11 percent and 15 percent and earnings per share growth above 20 percent.

Interesting note - I missed this little tidbit last year.  It's good to be an oligarch - what are you going to do?  Say you'll take your processing business elsewhere?  Certainly this 2 cents has been passed onto the consumer...
  • Visa added a processing fee last July of almost 2 cents on each transaction, helping boost revenue.

[Jun 18, 2009: Visa, Mastercard v Walmart, Target]
[Mar 30, 2009: Barron's - The Pleasure of Plastic: Mastercard (MA) and Visa (V)]
[Jun 9, 2008: Mastercard, Visa see Gold in PrePaid]

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