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Visa Inc. Earnings Surge 28%

By Markets Fool.com

Image source: Visa.

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Visa (NYSE: V) reported fiscal fourth-quarter results on Oct. 24. The global payments network operator delivered strong increases in sales and profits as it ramps up its European operations.

Visa results: The raw numbers

Metric

Q4 2016

Q4 2015

Growth (YOY)

Revenue

$4.261 billion

$3.571 billion

19%

Net income

$1.931 billion

$1.512 billion

28%

Earnings per share

$0.79

$0.62

28%

Data source: Visa Q4 2016 earnings press release. YOY = year over year.

What happened with Visa this quarter?

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Net operating revenue jumped 19% year over year to $4.3 billion, boosted by Visa's recent acquisition of Visa Europe, as well as growth in processed transactions and payments volume. Excluding the effects of foreign exchange rate fluctuations, revenue increased 22%.

Service revenue, which is recognized based on payment volume in the prior quarter, rose 8% to$1.8 billion as payments volume increased 10% to $1.3 trillion on a constant-dollar basis and excluding Visa Europe.

Data processing revenue leapt 25% to$1.8 billion, with the number of transactions processed on Visa's network (including Visa Europe) surging 41% to 25.9 billion.

International transaction revenue soared 36% to$1.5 billion, and other revenue inched up 1% to $218 million.

Client incentives, which are a contra revenue item, were $993 million. That represented 18.9% of gross revenue, up from 18.4% in the year-ago quarter.

Total operating expenses increased 27% to $1.6 billion, mostly due to increased expenses related to the acquisition of Visa Europe. Excluding non-recurring severance costs, adjusted operating expenses were$1.5 billion, an 18% increase from the prior-year period.

All told, adjusted net income improved 27% to $1.9 billion, or $0.78 per share.

"We continue to deliver healthy earnings growth in the face of continued, but abating headwinds," saidCEO Charlie Scharf. "We have begun to see the benefits from our acquisition of Visa Europe and strong cost discipline helped our results."

Looking forward

Visa issued its financial outlook for fiscal 2017, including:

  • Net revenue growth of 16% to 18%
  • Operating margin in the "mid 60s"
  • EPS growth in the low-30% range on a GAAP basis and "mid-teens" on an adjusted basis

"We are unwavering in our commitment to invest in client partnership opportunities and the further build out of our digital payments capabilities," added Scharf. "As we enter fiscal 2017, we are positioned well as revenue headwinds will continue to ease, we will continue to see the benefits from VisaEuropein our results, and our strong client franchise continues to grow."

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Joe Tenebruso has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.