Visa Earnings Do Not Impress Investors

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Visa Inc. (NYSE: V) reported fiscal second quarter 2014 results after markets closed on Thursday. The credit card issuer posted adjusted diluted earnings per share (EPS) of $2.20 and revenues of $3.16 billion. In the second quarter of 2013, Visa reported EPS of $1.92 on revenues of $2.96 billion. Thomson Reuters had estimates for EPS of $2.18 and $3.19 billion in revenue.

In the company’s outlook for the full fiscal year, Visa guided revenue growth of 10% to 11% with the expectation of a 2% negative impact from currency translation effects.. Adjusted annual EPS is forecast to rise in the mid- to high-teens and free cash flow is forecast to come in at around $5 billion.

Based on last year’s totals, Visa’s full-year revenues are forecast at $12.95 to $13.01 billion. The consensus analysts’ estimate calls for revenues of $12.93. Using a range of 15% to 19% for EPS growth we calculate 2014 EPS in a range of about $8.73 to 9.03. The consensus estimate calls for EPS of $8.88.

Visa repurchased $1.1 billion of stock in the quarter and has $3 billion remaining in its authorization for additional buybacks.

The company’s CEO said:

As expected, softer net revenue growth was impacted by a strengthening U.S. dollar and difficult year-over-year comparisons due to non-recurring items. We expect this impact to be slightly more pronounced next quarter before rebounding in our fiscal fourth quarter, which will be more reflective of the fundamental strength of the business model. We continue to make substantial investments in products and services that will drive our future growth, while enhancing our financial institution and merchant client relationships.

Second-quarter EPS of $2.52 includes a tax benefit of $218 million of which $201 million relates to prior periods. Excluding the prior period benefits, adjusted EPS of $2.20 is barely higher than the consensus estimate and revenues were a little short. That will be enough to weigh down the shares

Visa’s stock is trading down about 1.3% after-hours at $206.50 after closing at $209.40. The 52-week range is $163.60 to $235.50. Thomson Reuters had a consensus analyst price target of around $257.00 before today’s report.

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