Visa: Financial Winner

NEW YORK ( TheStreet) -- Visa ( STT) was the winner among major U.S. financial names on Thursday, with shares rising over 4% to close at $194.61.

The broad indices ended higher, with slight gains for the Dow Jones Industrial Average and S&P 500 ( SPX.X), while the NASDAQ Composite rose 1% on the strength of Facebook ( FB), which was up 30% to close at $34.36. Facebook reported a 61% year-over-year increase in advertising revenue.

Stocks recovered from midday losses, which were described as "a healthy pause" by Jason Weisberg of Seaport Securities in an interview from the floor of the New York Stock Exchange . When asked if the indictment of SAC Capital Advisors, Weisberg said the hedge fund manager's "story is never ending," and that there was some "concern in the institutional community, because they are trying to get a grasp at what's at stake."

"It was news to me this morning that now SAC's trading's being looked at as far back as 1999."

Weisberg said investors were "really focused on the guidance" companies were providing in their second-quarter earnings reports.

"We need the financials to participate in any upside momentum for the market to really carry through to the upside," he said.

The KBW Bank Index ( I:BKX) was down slightly to close at all but seven of the 24 index components declining for the session.

Visa's Strong Outlook

Investors were thrilled with Visa's results for its fiscal third quarter, which were announced after the market close on Wednesday. For the quarter ended June 20, the payment processor reported earnings of $1.225 billion, or $1.88 a share, compared to a net loss of $1.839 billion, or $2.74 a share a year earlier, when Visa made a provision for litigation reserves of $4.1 billion to cover its portion of a large settlement between card processors and banks, including JPMorgan Chase ( JPM), Bank of America ( BAC), and a group of retailers over anticompetitive processing fees.

Adjusting for the extraordinary expenses during the prior year's quarter and for tax benefits, Visa said its fiscal third-quarter earnings were up 16% year over year, while earnings per share were up 20%. The higher EPS came about because the company's share buybacks lowered the weighted average count of Class A common shares to 651 million from 681 million a year earlier.

Visa bought back 6 million shares during the most recent quarter, at an average price of $176.75 a share, for a total of $981 million, and on Wednesday announced a new $1.5 billion share repurchase program.

The company said its adjusted fiscal third-quarter net operating revenue totaled $3 billion during the fiscal third quarter, up 17% year over year, "driven by strong growth in service revenues, data processing revenues and international transaction revenues."

Visa also said payment processing volume on a constant volume basis was up 13% year-over-year to $1.1 trillion during the most recent quarter.

The company made positive adjustments to its outlook for fiscal 2013, with expected annual revenue growth of 13%, when the previous guidance was "low double digits." Visa also raised its guidance for fiscal 2013 EPS growth to the "low twenties" from the previous guidance of 20%. For 2014, Visa's outlook is unchanged, with revenue projected to grow in the "low double digits" and EPS growing in the "mid to high teens."

Oppenheimer analyst Glenn Green rates Visa "outperform," with a 12-18 month price target of $205, and late on Thursday raised his fiscal 2014 EPS estimate for the company to $8.85 from $8.71. "Despite the sluggish macro environment, we remain encouraged by Visa's solid payment volumes and revenue growth," Green wrote. "We continue to believe Visa is well positioned to benefit from expanding consumer consumption, the secular trend toward electronic payments, and expanding international card usage/merchant acceptance."

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-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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