Visa Inc (V)

[eastunder]

Visa Plans Big Buyback.

By Bob O'Brien 10-28-09

http://blogs.barrons.com/stockstowatchtoday/2009/10/28/visa-plans-big-buyback/?mod=yahoobarrons

(More info on an earlier post - will sticky note this one)

There’s an offset to virtually every constructive talking point that Visa (V) reported in its third-quarter profit statement. But Wall Street has put the emphasis solidly on the positive, applauding the fundamental performance and, just as loudly, the buyback that the credit-card transaction processor announced.

Visa said it would spend $1 billion to buy back its stock in both a systemic and opportunistic plan to repurchase its shares. It’s a shareholder-friendly initiative, to be sure, but one that comes at a cost: with the stock trading at a 52-week high after the results, it’s going to pay top price for any shares it retires.

There’s also an argument to be made that an ambitious and expensive buyback plan represented a concession on the part of management that it couldn’t think of anything better to do with its cash. But with nearly $5 billion in uncommitted cash, Visa has enough dry powder to make an acquisition and fund its buyback.

Visa surprised to the upside with a revenue total of $1.9 billion, at least $100 million more than analysts had been anticipating. Its profits came in slightly ahead, at 74 cents a share versus forecasts of about 72 cents. Some of the revenue improvement owed, however, to the reality that consumer used their debit cards in greater number, and credit cards in lesser. Debit-card volume rose 7% in the third quarter, versus a 9% decline in credit-card volume in the period. That relative performance is a way of saying that consumers are retreating on some purchases, suggesting they’re only buying as long as they can pay as they go.

Bulls on the stock would point out that the credit-card volume trends have begun to improve. Visa said that credit-card volumes fell 7% in September, less than third-quarter trends as a whole. The first three weeks of October, the trend accelerated: credit-card volumes declined just 4%.

However, debit-card usage rose more quickly: after up 7% for the third quarter, it grew 9% for September, and 11% the first three weeks of October. Overall, though, it’s a beneficial take-away, as it suggested that consumer spending, on the whole, had improved.