Visa (V) Shares Tank on Weak Guidance

Shares of Visa Inc. (V) were off -3.04 or -3.76 percent to $77.75 per share in Friday’s premarket after the company reported better than expected earnings for the company’s second quarter on Thursday after the market close. Despite the positive earnings, the company revised its guidance and issued a lower than expected forecast for its full year 2016 earnings. Visa stock closed at $80.79, down -0.36 or -0.44 percent in Thursday’s regular trading session.

Stock Analysis

Founded in 1958, Foster City, California-based Visa Inc. is a transnational payments technology company that facilitates electronic funds transfers and is the largest payments network in the world.
Visa services consumers, financial institutions, businesses and governments in over 200 countries worldwide through the company’s branded credit and debit cards. The company does not issue cards or extend credit, but rather operates the world’s most advanced processing network called VisaNet, which can handle over 65,000 transactions per second. The company’s Visa-branded payment products are how Visa enables financial institutions to offer customers payment options such as debit, prepaid or pay later with their credit products.

Visa reported net income of $1.7 billion or $0.71 per share in its fiscal second quarter, which compares to $0.63 per share in the same period one year ago. With the adjustment of one time items, Visa reported it had earned net income of $1.6 billion or $0.68 per share in the second quarter compared with $0.63 in last year’s second quarter.

Net operating revenue came to $3.6 billion in the quarter, an increase of six percent nominally and nine percent on a constant currency basis over the $3.41 billion in revenue the company reported in same period last year. The analyst consensus was for the company to report net earnings of $0.67 per share on $3.6 billion in revenue.

Visa’s Chief Executive Officer, Charlie Scharf, noted in the company’s press release that, “The continued headwinds of the strong U.S. dollar, lower oil prices, and an uneven global economy are driving continued weak cross-border spend, but domestic spend continues at reasonably strong levels consistent with last quarter. In fact, most of our growth metrics look very similar to what we saw last quarter. The U.S. consumer remains strong, but we see weakness in China, Brazil, and oil based economies. Since we are not seeing any material improvements in economic trends, we are cautious as we head into the second half of fiscal 2016. The continued headwinds we see do not take away from the underlying growth in our business and our continued conviction in the great opportunities to grow global penetration of electronic payments for years to come.”

Visa reported total processed transaction that represents transactions processed through VisaNet came to 18.5 billion for the quarter, a nine percent increase over the same period one year ago. In addition, the company entered into currency forward contracts to mitigate some of its foreign exchange exposure in the company’s anticipated Visa Europe acquisition. The forward contracts had Visa record a non-recurring net unrealized gain of $116 million in non-operating income.

For the full year, Visa expects low double-digit growth on a constant dollar basis in earnings per share and growth for annual net revenue of seven to eight percent with an estimated 3 percentage points in negative foreign currency impact. The company previously expected growth in the mid-teens for the full fiscal year.

Visa shares are off over three percent in the premarket, which is an improvement over the stock’s performance in yesterday’s aftermarket, when the stock was down over six percent.

Other News About V

Visa Alters Terms of Europe Deal and Warns of Delay; Shares Falls

Visa said that the purchase may not be complete until after June.

Visa Inc. Declares Quarterly Dividend

Company will pay a $0.14 dividend on June 7th to shareholders of record on May 13th, 2016.

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Published on Apr 22, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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