Monday, February 1, 2010

Visa Inc. (NYSE: V): Q1 Earnings Preview 2010

. Monday, February 1, 2010

By Stock Wizard

Visa Inc. (NYSE: V), the world’s largest electronic payments network, is scheduled to release its fiscal first quarter 2010 earnings after the closing bell on Wednesday, February 3, 2010. Analysts, on average, expect the company to report earnings of 91 cents a share on revenue of $1.92 billion. In the year ago quarter, the company reported earnings of 78 cents per share on revenue of $1.74 billion.

Visa Inc. operates retail electronic payments network worldwide. It facilitates commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses, and government entities. The company owns and operates VisaNet, a global processing platform that provides transaction processing services, primarily authorization, clearing, and settlement, as well as related value-added services.

Visa managed to escape relatively unscathed from the worst consequences of the global recession as credit-card networks are insulated from rising defaults because they process transactions and don’t make loans to cardholders. The continuing adoption of credit and debit cards worldwide has cushioned the effects of a U.S. slowdown. Total processed transactions, which represent transactions processed by VisaNet for the fiscal fourth quarter, increased 9% to 10.5 billion from the year-ago quarter.

In the preceding fiscal fourth quarter, the San Francisco, California-based company posted net income of $514 million or $0.69 per class A share for the fourth quarter, compared to a loss of $356 million or $0.45 per share in the prior year quarter. Excluding items, adjusted net income grew to $552 million or $0.74 per class A share from $448 million or $0.58 per class A share in the year-ago quarter. Fourth quarter net operating revenue increased 10% to $1.9 billion from $1.7 billion in the same quarter last year, driven primarily by strong contributions from data processing revenues as processed transactions grew 9%. Analysts, on average, expected the company to report earnings of $0.72 per share on revenue of $1.78 billion.

Total cards carrying the Visa brands rose 5% worldwide to over 1.7 billion from the fourth quarter of 2008.

For fiscal 2010, Visa expects earnings per class A share growth to be greater than 20%, and net revenue growth at the lower end of the 11% to 15% range. The company expects full year 2010 operating margin to be in the mid-50s, up slightly from the low-50s Visa achieved in its last fiscal year. Its projection for free cash flow for the year is north of $2.0 billion.

For fiscal 2011, the company anticipates earnings per class A share growth to be greater than 20%.

At September 30, 2009, the company had cash, cash equivalents, restricted cash, and investment securities of $6.6 billion.

Visa said that its board has authorized a $1 billion share repurchase plan. The authorization will be in place through September 30, 2010, and is subject to extension or expansion at the determination of Visa's board.

Among other developments, Standard & Poor's added Visa Inc. to the S&P 500 index in December.

The upcoming quarterly report is likely to reflect strong holiday season and improved transaction levels, volume and international travel.

The company's stock currently trades at a forward P/E (fye 30-Sep-11) of 18.77 and PEG ratio (5 yr expected) of 1.14. In terms of stock performance, Visa shares have gained 79 percent over the past year.

Full Disclosure: None.

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