Visa Inc.'s profit tumbled 75% in the most recent quarter as it booked charges related to the reorganization of its Europe business, though revenue rose more than expected amid robust growth in payments and cross-border volume and processed transactions.
Shares rose 2.8% after hours to $93.70.
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Like rival Mastercard Inc., Visa is a payment network that processes credit-card and debit-card transactions, making a percentage off each.
The company purchased its European operations last June, a deal designed to bring its global operations under one roof. And during the latest quarter, Visa completed a legal entity reorganization of Visa Europe and other units to align its global corporate structure with the geographic jurisdictions in which it operates. Accordingly, Visa recorded a $1.5 billion income tax provision and a $192 million administrative expense tied to the charitable donation of Visa Inc. shares acquired as part of Visa Europe.
In all for the fiscal second quarter, Visa earned $430 million, or 18 cents a Class A share, down from $1.71 billion, or 71 cents a share, a year earlier. Excluding items related to the reorganization, earnings were 86 cents, topping the average analyst estimate for 79 cents, according to Thomson Reuters.
Net operating revenue climbed 23% to $4.48 billion, above the $4.3 billion analysts were looking for.
Payments volume for the quarter climbed 37% on a constant-dollar basis to $1.7 trillion. Total processed transactions surged 42% to 26.3 billion.
The company is reaping the rewards from a growing credit-card market and recent wins as companies, including Costco Wholesale Corp. and USAA, switched card programs to its network. As lenders continue to push generous rewards programs and credit-card issuance keeps rising, the ripple effects are being felt by the Visa network.
Cross-border volume growth more than doubled in the quarter from a year earlier on a constant dollar basis.
Expenses, however, were also up, jumping 40%, mostly owing to the Visa Europe transaction as well as increases in personnel and marketing costs.
Visa lifted slightly its guidance for the current year, and now anticipates adjusted earnings to increase at the high end of the mid-teens, compared with previous guidance for growth in the midteens on a percentage basis. The company still expects revenue to rise at the high end of 16% to 18%.
Write to Anne Steele at Anne.Steele@wsj.com
Visa Inc. reported profit and revenue increases for the first three months of 2017 that beat Wall Street expectations thanks to robust growth in transactions and the amount cardholders charged.
This is the second consecutive quarter in which Visa has materially exceeded analyst expectations, reflecting stronger economic growth globally and a booming U.S. credit card market.
Visa's stock rose around 2.7% after hours, extending gains posted so far this year. Before reporting its latest results, Visa's shares had risen nearly 17% in 2017, topping the performance of rivals such as Mastercard Inc., American Express Co. and Discover Financial Services.
The company's performance was helped by its purchase of its European operations last June, a deal designed to bring its global operations under one roof. That effort, however, led to a drop in reported profit; net income in the company's fiscal second quarter ended March tumbled 75% from a year earlier due to charges related to the reorganization.
Visa reported net income of $430 million, or 18 cents per share for the quarter. Excluding items related to the reorganization, net income was $2.1 billion, or 86 cents per share. In both cases that represented more than 20% growth from the year earlier period, while earnings per share topped analyst estimates of 79 cents, according to Thomson Reuters.
Net operating revenue climbed 23% to $4.48 billion, above the $4.3 billion analysts expected.
Visa, like Mastercard, is a payment network that processes credit-card and debit-card transactions, taking a small cut of each purchase. The two companies don't actually extend credit to cardholders, which is done by banks and others issuing cards.
Visa continues to benefit from a growing credit-card market in which those issuers are competing for more card users and purchase volume. Visa is the network for many in-demand credit cards, including the J.P. Morgan Chase Sapphire Reserve card that launched last year. Also helping fuel Visa's performance is the recent switch for Costco Wholesale Corp. cards from American Express to the Visa network.
Visa also recently renewed many deals with card issuers and merchants. Chief Executive Alfred Kelly said on the earnings call that this included multiyear card deals with PNC Financial Services Group Inc., Citizens Financial Group Inc., and First National Bank of Omaha. He said the card network also renewed a co-brand deal with Hyatt Hotels Corp.
Visa also signed a new 10-year exclusive partnership with ANZ Bank in Australia and New Zealand.
Visa reported double-digit year-over-year growth in payments volume, transactions and total cards. Payments volume for the quarter climbed 37% on a constant-dollar basis to $1.7 trillion. Total processed transactions surged 42% to 26.3 billion.
But operating expenses also rose by 24% after adjustments related in part to one-time items. The biggest increase occurred in personnel costs.
Visa finance chief Vasant Prabhu said that costs, such as those related to client incentives, will continue to pick up this year.
Additionally, Visa is investing in new areas where it projects payments will head in the future. That includes a recent announcement the firm has partnered with International Business Machines Corp. to add payment capabilities to many internet-enabled devices, including fitness bracelets, washing machines and cars.
Visa also lifted its financial guidance slightly for the current fiscal year. It now anticipates adjusted earnings to increase at the high end of the midteens, compared with previous guidance for growth in the midteens on a percentage basis. The company expects revenue to rise at the high end of 16% to 18%.
Write to AnnaMaria Andriotis at email@example.com and Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
April 20, 2017 18:32 ET (22:32 GMT)