Visa Profit Surges in First Quarter Public

The electronic payment processor said growth in payment volumes helped the company surpass Wall Street's expectations.
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Visa

,

(V) - Get Report

, one of the world's biggest credit-card processors, said Monday its profit surged during its first quarter as a public company as people across the globe spent more on its network.

The company's profit rose 27.6% to $314 million, or 39 cents per share, during its fiscal second quarter from $246 million, or 93 cents per share, in the year-ago period. Revenue climbed 22% to $1.45 billion from $1.19 billion.

Adjusted earnings, which exclude special items, were 52 cents per share, far exceeding the average analyst estimate of 46 cents per share, according to Thomson Financial.

International growth and increased debit-card use at home were the two main drivers for the San Francisco-based company's results as the U.S. economy stood on shaky ground. While Visa's growth rates in emerging markets like the Asia-Pacific region are much faster than in the U.S., domestic results still contribute the biggest share of revenue. Non-discretionary items took up a larger chunk of Visa's U.S. transactions as consumers faced higher prices for items like food and gasoline.

Overall payment volumes rose 19% to $681 billion, while processed transactions rose 16% to $11 billion. Increases came across all of its global divisions. The company said that the higher fee structure it implemented during the third fiscal quarter contributed to its better results. Visa also received higher revenue from data processing and cross-border transactions.

The company said an increase in fees it receives for servicing, data processing and international transactions all contributed to the profit boost. Payment volumes rose 19% to $681 billion, while processed transactions rose 16% to $11 billion. Increases came across all of its global divisions.

"Despite a challenging economic environment, Visa recorded strong growth in payments volume and transactions globally and across our diverse suite of products -- a trend which is continuing into the fiscal third quarter," CEO Joseph Saunders said in a statement.

Visa, which had been owned by a consortium of banks, raised $17.3 billion in its initial public offering last month. The banking industry, which has been hurt by the souring housing, mortgage and credit markets, also benefitted from its IPO. Smaller regional banks like

Huntington Bancshares

(HBAN) - Get Report

and

KeyCorp

(KEY) - Get Report

, as well as bigger entities like

JPMorgan Chase

(JPM) - Get Report

and

Bank of America

(BAC) - Get Report

, all said first-quarter results were aided by selling Visa stock.

The company's shares have surged about 60% since its offering was priced at $44 per share. Visa may initiate a stock repurchase plan in 2009 because "management is very focused on not allowing excess cash to build up on our balance sheet," CFO Byron Pollitt said during a conference call.

Several analysts initiated Visa stock with a buy or outperform rating on Monday, citing its significant market-share advantage over its main competitor,

MasterCard

(MA) - Get Report

, and potential to grow its business globally.

SunTrust Robinson Humphrey analyst Andrew Jeffrey wrote. He called the company a "primary beneficiary of the global shift to electronic transactions at the point of sale." He initiated Visa stock at buy, saying he expects the company to deliver "sustainable above-average long-term" growth in revenue, earnings and cash flow.

Wachovia analyst Daniel Perlin called Visa the "best way to invest in the globalization of formalized payments," estimating double-digit revenue and earnings growth over the next three years as well. He initiated Visa with an overweight rating.

However, Credit Suisse analyst Moshe Orenbuch cited price competition with MasterCard as a "major risk," as is the potential for lower fees due to regulatory issues. He initiated Visa stock with a neutral rating and $70 price target on Monday.

Pollitt said Visa's pricing is "maybe slightly lower, but pretty comparable to MasterCard" at current levels. MasterCard is scheduled to report earnings on Tuesday.

Visa shares were falling 5.8% to $71.22 in recent after-hours trading, as investors took profits.