Visa's Earnings Increase 11% -- WSJ

By AnnaMaria Andriotis and Allison Prang Features Dow Jones Newswires

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 26, 2017).

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Visa Inc. reported an 11% increase in profit for its fiscal fourth quarter, adding fuel to an already robust rally this year for the card company's stock.

Earnings were $2.14 billion for the quarter, or 90 cents a share, beating analysts' estimates of 85 cents a share. Net operating revenue rose 14% from a year ago to $4.86 billion, bolstered by a 10% rise in payments volume as consumer card-based spending in the U.S. and abroad continues to rise.

The San Francisco-based company forecast robust growth for its new fiscal year, which started Oct 1. Finance chief Vasant Prabhu said that Visa's fiscal year 2018 outlook is for adjusted earnings per share growth at the high end of a midteens percentage range.

Visa shares rose about 2% in morning trading. Alongside companies like Boeing Co. and Apple Inc., Visa's stock price -- which is up about 40% for the year -- has helped fuel a rise in the Dow Jones Industrial Average, which crossed the 23000 threshold this month.

Chief Executive Al Kelly said on the earnings call that several drivers of growth contributed to the company's strong performance over the past year. Strong economies have resulted in increased consumer spending and the addition of Visa Europe to the company's lineup, which Visa finished acquiring in June 2016, has also helped to boost transaction activity on the Visa network. Before the acquisition, Visa Europe was a separate entity that was owned by banks and other financial firms.

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Visa has also benefited from new partnerships that kicked in last year, most notably with Costco Wholesale Corp. The store's credit card switched from running on the American Express Co. network to Visa in June 2016. USAA, one of the country's largest issuers of debit and credit cards, switched to Visa from Mastercard Inc. last year.

Year-over-year payments volume growth slowed in the fourth quarter, rising 10% compared with the 38% year-over-year growth Visa posted in its fiscal third quarter. Payment volume growth, while still up in the U.S., also decelerated. Part of that is a slowing down in the initial spike in payments volume that Visa experienced after taking on the Costco and USAA accounts.

The hurricanes and other natural disasters that hit the Caribbean and Mexico during this past quarter also affected payments volume. Those effects are continuing, Mr. Prabhu said, as travel to those areas remains down.

Visa, while a card company at its core, has been investing in partnerships that expand its reach as a payments company -- a strategy meant to ensure that the firm will remain a leader in consumer spending even if fintech firms or other payment types grab more market share. In July, it extended its partnership with PayPal Holdings Inc. in Europe. In August, Visa said it was enabling Visa payments on Fitbit's first smartwatch -- part of a broader strategy to add payments to a range of devices consumers increasingly use.

"A good characteristic of any CEO is to be a bit paranoid," said Mr. Kelly on the call. "We are really laser focused on the future and the fact that there are disruptive forces in the marketplace."

Big shifts in markets abroad could impact Visa. In Europe, regulators are looking to make payment transactions more secure and to foster innovation that allows for fintech firms to become bigger players. Visa, like several other U.S.-based card networks, has been trying to make inroads in China. The U.S. and Chinese governments reached an agreement in May that is supposed to result in more access to the Chinese economy for electronic-payments providers. That reignited hopes that Visa and Mastercard may get more market share in China.

Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com and Allison Prang at allison.prang@wsj.com

(END) Dow Jones Newswires

October 26, 2017 02:49 ET (06:49 GMT)