NEW YORK (TheStreet) -- Shares of Visa (V) rose 4.7% to $232.18 on Friday, following American Express' (AXP) quarterly earnings report.
American Express' fourth-quarter revenue increased by 5% from a year earlier. Net income for the credit card company rose to $1.3 billion, or $1.21 a share, from last year's $637 million, or 56 cents a share. The company also reported an 8% year-over-year increase of worldwide card spending to $254 billion.
Shares of American Express gained 3.6% on Friday to close at $90.97.
While the two companies have differing business models, American Express, like Visa, is a payment processor, and the solid increase in card spending it reported could bode well for Visa.
Visa is scheduled to announce its quarterly earnings on Jan. 30, with analysts polled by Thomson Reuters estimating earnings of $2.16 a share, increasing from EPS of $1.93 a year earlier.
TheStreet Ratings team rates Visa as a "buy" with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:
"We rate VISA INC (V) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 22.8%. Since the same quarter one year prior, revenues slightly increased by 8.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- V has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, V has a quick ratio of 1.59, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for VISA INC is rather high; currently it is at 62.46%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 40.09% significantly outperformed against the industry average.
- Net operating cash flow has increased to $2,045.00 million or 49.37% when compared to the same quarter last year. In addition, VISA INC has also vastly surpassed the industry average cash flow growth rate of -13.17%.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the IT Services industry and the overall market on the basis of return on equity, VISA INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- You can view the full analysis from the report here: V Ratings Report