Visa results beat the street

We prefer Visa (ha-ha) as an investment, the stock took some heat afterhours with an announcement that coincided with their earnings release, and a US anti-trust investigation.

So, Visa had results post market yesterday, here is the full release here:Visa Inc. Posts Strong Fiscal Second Quarter 2012 Earnings Results. EPS of 1.60 Dollars per share, which was a beat of ten cents per share, and a dividend of 22 US cents per share. Net income increased 23 percent when compared to the prior year to 1.1 billion Dollars, with GAAP net operating revenue higher by 15 percent to 2.6 billion Dollars. Total transactions processed were a whopping 13 billion, which was 8 percent higher. Or, 141.3 million transactions per day. I said to Byron that does not sound like a lot really, and he pointed out that 85 percent of all transactions globally are still in cash. WHAT? And which way do you think the regulators want this to move? Electronic payments will tell you everything that you want to know of course, all governments from a safety point of view. There is a holding cost of cash.

What I found quite interesting is this line: "International transaction revenues, which are driven by cross-border activity, grew 17% over the prior year to $733 million." Cross border activity? That means that people are buying stuff from other countries and using Visa's secure network. Or, tourists are using their debit and credit cards for buying stuff or services, trusting the network more and more. Which is interesting in a way I guess, but not surprising really. 17 percent? And as we said, look at that, still there are many cash transactions. And strangely, as they mention on their website: "70 percent of Visa payment transactions in the United States are not credit, but debit and prepaid" So, folks are transacting in electronic "cash" transactions.

Back to these results, which were a beat of course, and guidance for the full year which was as follows: "Annual net revenue growth in the low double digits", I read that as around 12 to 13 percent or so. Perhaps higher. Marketing expenses under 1 billion Dollars looks a little high, bearing in mind that the quarterly marketing expense ran at 170 million Dollars. Just looks "high", but perhaps just guidance. As ever there are always risks, they spell it out, rules capping the charges and further government "reforms". And then Visa talks about economic conditions like European sovereign issues, other global "problems" and currencies are also an issue too. On balance, the stock forward looks cheaper than MasterCard, and we will continue to accumulate shares of the major electronics payments system globally.