Visa Inc.’s (V - Analyst Report) fiscal fourth-quarter 2013 (ended Sep 30, 2013) operating earnings of $1.85 per Class A common share were in line with the Zacks Consensus Estimate but outpaced the prior-year quarter figure of $1.54 per share. Results in the reported quarter included a restructuring reserve of about 4 cents per share.
Net income increased 15.2% to $1.19 billion from $1.04 billion in the year-ago quarter. Including reversal of tax reserves of $627 million or 93 cents per share, reported net income in the year-ago quarter was $1.66 billion or $2.47 per share.
Alongside, total operating revenues for the reported quarter were $2.97 billion, up 8.9% year over year but lagging the Zacks Consensus Estimate of $3.02 billion. Growth was driven by higher card spending and strong performance across all segments.
Service revenues increased 9.6% year over year to $1.39 billion and are recognized based on payments volume in the prior quarter. All other revenue categories are recognized based on the current quarter activity. Data processing revenues grew 11.7% from the prior-year period to $1.19 billion.
Additionally, International transaction revenues, which are driven by cross-border payments volume, rose 12.9% over the prior-year quarter to $899 million. Other revenues, earned through Visa Europe’s licensing fee, were $183 million, improving 6.4% from $172 million in the year-ago quarter. Client incentives, which is a contra-revenue item, came in at $680 million, and accounted for 18.6% of gross revenues.
On a constant dollar basis, payment volume increased 13% year over year to $1.1trillion. Total processed transactions carrying the VisaNet brand increased 14% year over year to 15.5 billion. Cross border volume, on a constant dollar basis, grew 11% over the prior-year quarter.
Meanwhile, total operating expenses inched up 1% year over year to $1.22 billion. Consequently, Visa’s operating income grew 15% to $1.75 billion, while operating margin rose to 58.9% from 55.7% in the year-ago period.
For full-year fiscal 2013, Visa reported operating earnings of $7.59 per Class A common share that beat the Zacks Consensus Estimate by a penny. Additionally, the earnings substantially exceeded prior fiscal year’s earnings of $6.20 per share. Consequently, operating net income escalated 18.5% year over year to $4.98 billion.
Including extraordinary items, GAAP net income in fiscal 2012 stood at $2.14 billion or $3.16 per share. However, no adjustments were recorded in fiscal 2013.
Alongside, total operating revenues were $11.78 billion, up 13% year over year, although it missed the Zacks Consensus Estimate of $11.82 billion. Total processed transactions carrying the VisaNet brand increased 10% year over year to 58.0 billion. Results were within management’s guidance.
Total core operating expenses rose 8.4% year over year to $4.54 million. Operating margin climbed to 61% from 60% in the prior fiscal year. However, GAAP operating margin reduced to 21% in fiscal 2012 owing to GAAP operating expenses of $8.28 billion. Effective tax rate was 31.4% in fiscal 2013 against 32.9% in fiscal 2012.
As of Sep 30, 2013, cash and cash equivalents and available-for-sale investment securities amounted to $4.26 billion, up from $2.82 billion as of Sep 30, 2012. Nevertheless, long-term debt remained nil at fiscal 2013-end, while total assets declined to $35.96 billion from $40.01 billion at fiscal 2012-end. Total equity was $26.87 billion, down from $27.63 billion as of Sep 30, 2012.
Further, Visa’s operating cash flow stood at $3.02 billion at the end of fiscal 2013 against $5.01 billion recorded at the end of fiscal 2012.
During the reported quarter, Visa repurchased about 7.0 million class A common shares for a total cost of $1.24 billion, while shares worth $5.34 billion were bought back during fiscal 2013.
Concurrently, the board sanctioned a new share repurchase program worth $5.0 billion. Including $251 million from the current set authorized in Jul 2013, Visa now has $5.25 billion of shares available for repurchases.
Visa detailed the financial outlook for fiscal 2014, anticipating annual operating earnings per share to grow in mid-to-high teens range. Annual net revenue growth is expected to be within low double-digits, with an adverse foreign currency impact of about 2%.
Meanwhile, the company affirmed annual operating margin of low-60% range. Further, Visa expects client incentives within 16.5−17.5% of gross revenues. Additionally, annual free cash flow is estimated to be around $5 billion in fiscal 2014.
On Oct 23, 2013, the board declared a 21.2% hike in its quarterly dividend to 40 cents per share of class A common stock from the prior 33 cents, marking the 5th consecutive annual dividend increment. Previously, in Oct 2012, the company had raised its dividend by 50%.
The hiked dividend will be paid on Dec 3, 2013, to the company’s common shareholders of record as on Nov 15, 2013.
On Sep 4, 2013, Visa paid a quarterly dividend of 33 cents per share to common shareholders of record as on Aug 16, 2013.
On Oct 16, arch rival American Express Co. (AXP - Analyst Report) reported its third-quarter 2013 operating earnings per share of $1.25. The result comfortably surpassed both the Zacks Consensus Estimate of $1.22 and the year-ago quarter earnings of $1.09 a share. Improved top line and cardmember spending supported growth.
Meanwhile, MasterCard Inc. (MA - Analyst Report) is slated to release its third-quarter 2013 earnings before the opening bell on Oct 31. Visa along with American Express, MasterCard and peer, Fiserv Inc. (FISV - Analyst Report), carries a Zacks Rank #2 (Buy).