Visa Q2 beats expectations

NEW YORK Wed Apr 28, 2010 8:32pm EDT

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NEW YORK (Reuters) - Visa Inc (V.N) reported a 33 percent increase in second quarter earnings, better than Wall Street expected, as consumer spending rebounded and management said it was increasingly optimistic about the economy.

The world's largest credit and debit card network boosted its 2010 revenue forecast on Wednesday and said that, besides Europe, "the world is traveling again."

Shares of Visa slipped 1.3 percent after hours, with one analyst attributing that to investors that have come to expect the company to beat expectations by even wider margins.

The company credited higher-than-expected growth in payments volume for the results. Payment volume growth for credit and debit cards rose 8 percent to $769 billion in the quarter ended December from a year earlier, boosting revenue in the latest quarter.

Visa "is increasingly optimistic that the worst of the recession is behind us," Joseph Saunders, its chief executive, said on a conference call with analysts and media.

"We remain watchful of the longer term sustainability of growth in the world economy," he said, adding: "I'm not betting on a continued recovery that just goes through the roof."

The company also intends to resume its share buybacks this fiscal year, "as conditions warrant," Saunders said.

Visa and its main rival, MasterCard Inc (MA.N), do not lend at all and have not suffered from credit losses affecting banks in the past two years. But their revenue growth was affected by the cutback in consumer spending during the recession.

The San Francisco-based company earned $713 million, or 96 cents per share, in its fiscal second quarter ended March 31. That compares with net income of $536 million, or 71 cents a share, a year earlier. Analysts on average expected Visa to earn 91 cents a share, according to Thomson Reuters I/B/E/S.

Revenue jumped 19 percent to $1.96 billion, better than expected.

"Expectations were high and the Street probably wanted more, but the way we see it is this is good enough," said Mayan Tandon, analyst at Signal Hill. "The trends are clearly positive, and if the recovery continues to take shape then Visa is in a good position to continue to beat expectations."

Visa also issued a slightly bolder forecast. It now expects annual net revenue growth at the high end of the 11 percent to 15 percent range it provided in February.

The company receives fees whenever consumers use one of its credit or debit cards. As consumers increasingly pay with plastic instead of cash or checks, the company's revenue rises.

But the opportunity for large revenue gains is relatively limited in the United States, where most consumers already use credit and debit cards. Like most of its competitors, Visa is increasingly hoping that emerging markets and new payment technologies will boost future business.

Revenue gains came in part from increased transactions, especially on debit cards, where payment volume for the quarter ended in December rose 17 percent on a constant basis from a year earlier. Credit card volume meanwhile rose 4 percent.

Visa CFO Byron Pollitt said the recent volcano in Iceland, which grounded northern European air travel, amounted to a three-day "blip", adding "it was a non-event" for revenues.

The growth in international payment volumes in the March and December quarters outpaced the comparable growth in U.S. volumes.

"Clearly, discretionary spending is coming back globally, and that's what's driving the uptick in credit volumes," said Tandon.

Visa's new payment technologies business should be boosted by its $2 billion acquisition of online payments company CyberSource Corp CYBS.O, a deal announced last week that is set to close by the end of September. The acquisition will eat up about half of Visa's cash.

Visa's revenue gains came in part from increased transaction volumes, which it said were "higher than expected".

The company's shares fell 1.3 percent to $92.43 after the close of markets, when the results were posted. Its shares have doubled over the past year and have risen about 6.4 percent since the beginning of the year.

(Reporting by Maria Aspan, additional reporting by Jonathan Spicer; Editing by Robert MacMillan, Steve Orlofsky and Carol Bishopric)

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