Visa fiscal 1st-quarter profit rises 33 percent on improved revenue, beats Street estimates

Visa 1Q profit rises 33 percent, beats estimates

DES MOINES, Iowa — Visa Inc. on Wednesday said its profit rose 33 percent in the fiscal first-quarter on increased revenue, even as consumers pull back sharply on spending amid the recession.

The payment processing giant reported net income of $763 million, or $1.02 per share, compared with $574 million, or 74 cents per share a year ago.

Revenue growth was strong in all segments, climbing 13 percent to $1.96 billion from $1.74 billion a year ago, driven by strong growth in all revenue categories, particularly data processing revenues and international transaction revenues.

Analysts surveyed by Thomson Reuters expected 91 cents per share on revenue of $1.92 billion, on average.

The company’s shares gained $2.39, or 2.9 percent, to $85.91 in aftermarket trading, after adding 49 cents to close at $83.52.

San Francisco-based Visa, operator of the world’s largest retail electronic payments network, went public in March in the biggest U.S. IPO ever. The launch came just as the U.S. economy fell deeper into a recession that is turning out to be longer-lasting and more far-reaching than most analysts had expected.

The quarterly results beat the expectations Red Gillen, senior analyst with Boston-based Celent, a financial consultant. He said Visa is likely to see increased revenue from services and transactions as the economy continues to improve.

“Given that cards occupy an increasingly dominant space in marketwide retail payments, Visa’s performance closely mirrors the overall economy,” Gillen said.

Visa said payment volume for the period ended Dec. 31 grew 8.5 percent to $769 million.

Total cards carrying the Visa brands rose 5 percent worldwide to 1.8 billion, and processed transactions for the three months ended Dec. 31 grew 12 percent to 10.9 billion.

CEO Joseph Saunders said in a conference call with analysts that the improved results reflect a continued shift to electronic payments, particularly to debit cards, which saw a 17 percent increase in payment volume in the quarter from the year-ago period.

Debit transactions now make up 54 percent of total U.S. payment volume, the company said.

Saunders said that is a reflection of increased debit card use by U.S. consumers to pay for fuel and other recurring expenses, which is reflective of economic conditions pushing customers to rely less on credit.

Signs are encouraging that consumers are beginning to spend again both in the United States and in international markets, Saunders said, but he remained cautious on economic recovery.

The company said beginning this year, it was changing its reporting system to reflect payment volume in the current quarter. Previously, the company reported for the previous three months — a one quarter lag time. Service revenues will continue to be recognized based on payments volume in the prior quarter, Visa said.

The company said it expects 2010 revenue growth between 11 percent and 15 percent and earnings per share growth above 20 percent.

Rival MasterCard Inc. reports quarterly numbers on Thursday.