Visa Sinks Despite Positive Earnings

Visa Inc. (NYSE: V) released fiscal second-quarter earnings report after the markets closed on Thursday. The company had $0.68 in earnings per share (EPS) on $3.6 billion in revenue versus Thomson Reuters consensus estimates that called for $0.67 in EPS on $3.60 billion in revenue. The same period from last year had $0.63 in EPS on $3.41 billion in revenue.

Revenues increased 6% nominally this quarter, and 9% on a constant dollar basis over the prior year, driven by continued growth in processed transactions and nominal payments volume. Service revenues came out to $1.7 billion, an increase of 8% from last year.

Total processed transactions, which represent transactions processed by VisaNet, totaled 18.5 billion for the quarter, reflecting a 9% increase over the prior year.

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During the fiscal second quarter, the Company entered into currency forward contracts to mitigate a portion of the foreign currency exchange rate risk associated with the upfront cash consideration to be paid in the anticipated Visa Europe acquisition. As a result, the Company recorded non-recurring, net unrealized gains of $116 million in non-operating income.

In terms of guidance for the full year, the company expects low double-digit growth on a constant dollar basis in EPS, and annual net revenue growth of 7% to 8%. There are consensus estimates calling for $2.80 in EPS on $14.92 billion in revenue for the fiscal-full year.

Charlie Scharf, CEO of Visa, commented:

Visa reported solid financial results in the fiscal second quarter. The continued headwinds of the strong U.S. dollar, lower oil prices, and an uneven global economy are driving continued weak cross-border spend, but domestic spend continues at reasonably strong levels consistent with last quarter. In fact, most of our growth metrics look very similar to what we saw last quarter. The U.S. consumer remains strong, but we see weakness in China, Brazil, and oil based economies. Since we are not seeing any material improvements in economic trends, we are cautious as we head into the second half of fiscal 2016. The continued headwinds we see do not take away from the underlying growth in our business and our continued conviction in the great opportunities to grow global penetration of electronic payments for years to come.

On the books, cash, equivalents, and short-term investments totaled $23.4 billion for the quarter.

Shares of Visa closed Thursday at $80.79, with a consensus analyst price target of $86.94 and a 52-week trading range of $60.00 to $81.73. Following the release of the earnings report, the stock was down 5% at $76.75 in the after-hours trading session.