Visa Inc (V)

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Visa Inc.'s (V) fiscal third-quarter net income rose 41% on higher payment volumes and processed transactions as the credit-card transaction processing giant also reaffirmed its three-year outlook for annual revenue and earnings growth.
"Despite a challenging economic environment in the United States and a softening in traditional credit card spending, the strength of Visa's debit business drove solid growth in the region," Chief Executive Joe Saunders said, adding that double-digit increases in payments volume and transactions are "further proof of the resiliency of our network business model."
Shares were halted in after-hours trading after closing the regular session up 3.3% at $78.45.
For the quarter ended June 30 - its second as a public company - Visa reported net income of $422 million, or 51 cents a share, compared with $299 million, or $1.44 a share, a year earlier.
Excluding items, including litigation, restructuring and purchase amortization, the company posted earnings of 59 cents a share.
Revenue rose 18% to $1.61 billion on strong contributions from service fees, data processing fees and international transaction fees.
Analysts polled by Thomson Reuters, on average, expected 48 cents a share on revenue of $1.55 billion.
Payment volume, or spending on Visa cards, rose 19% to $652 billion, while transaction volume rose 22%. The company said the number of Visa-branded cards rose 14% worldwide to 1.6 billion.
The company reaffirmed its April goal of 11% to 15% annual revenue growth for the next three years and annual per-share earnings growth of 20% or greater. For 2009, the first year growth comparisons are available, analysts expect per-share earnings to grow 25% to $2.55 on revenue up 14% to $7 billion.
Within two months of its $19.65 billion initial public offering, the largest in U.S. history, Visa shares had more than doubled and remain about 78% above their IPO price. Part of the reason for its success is that the company makes money off processing transactions, rather than actual consumer spending.
While Visa and primary competitor MasterCard Inc. (MA) are often mistaken for credit-card issuers, they, in fact, specialize in processing credit-card payments for banks and have no exposure to credit-card loans. As more payments are processed electronically around the world, the businesses of both companies stand to grow significantly.
However, there could be obstacles ahead. The company faces a potential price war with MasterCard, which could lead to the defection of large clients, and future litigation expense. Visa deposited $3 billion of the money it raised in its IPO into an escrow account to cover settlements that result from a tangle of lawsuits related to interchange fees and to anticompetitive allegations by Discover Financial Services (DFS) and American Express Co. (AXP).
According to documents unsealed last month, Discover is seeking $6 billion in damages in a 2004 lawsuit against Visa and MasterCard over anti-competitive rules that Discover claims limited its growth by precluding member banks from issuing credit and debit cards over the Discover network.
-By Lauren Pollock, Dow Jones Newswires; 201-938-5964; [e-mail]

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