Earnings Preview: Visa Inc.

BOSTON - Visa Inc. reports earnings for the fiscal first quarter on Wednesday after the market close. The following is a summary of analysts' thoughts on Visa and developments during the April-to-June period.

OVERVIEW: The latest quarter was Visa's third full quarter as a public company. San Francisco-based Visa, operator of the world's largest retail electronic payments network, went public in March in the biggest U.S. IPO ever. The launch came just as the U.S. economy fell deeper into a recession that is turning out to be longer-lasting and more far-reaching than most analysts had expected. Visa's report will offer a snapshot of how credit-card companies are faring as consumers pull back sharply on spending. Rival MasterCard Inc. reports quarterly numbers on Thursday.

While they've done better than banks lately, both payment card companies have been hurt by the faster-than-expected drop in consumer spending. On Jan. 16, Keybanc Capital Markets analyst Anurag Rana downgraded Visa, along with other payment processors, following fourth-quarter results from Bank of America Corp. and Citigroup Inc. showing weak spending data.

BY THE NUMBERS: Analysts polled by Thomson Reuters anticipate, on average, a profit of 66 cents per share on revenue of nearly $1.68 billion for the quarter. That would be up sequentially from Visa's fiscal fourth-quarter profit of 58 cents per share, excluding one-time items.

ANALYST TAKE: Andrew Jeffrey, of SunTrust Robinson Humphrey, said in a research note that he has a more conservative outlook on Visa's earnings and revenue prospects because of the recent disappointing results from card-issuing banks.

But Jeffrey remains bullish on Visa's stock because of the company's above-average sustainable earnings growth, leading brand, pricing power and protected competitive position.

Deutsche Bank analyst Christopher Mammone forecasts Visa will post first-quarter revenue of $1.7 billion — slightly above analysts' consensus forecast — and profit of 65 cents per share.

While noting that Visa typically outperforms its rivals, Mammone wrote that "increased focus on pricing/cost will be crucial to protect earnings."

WHAT'S AHEAD: Visa recently expressed confidence in its ability to meet its guidance for 20 percent growth in earnings per share for the full fiscal year.

"We thought this was a meaningful endorsement," wrote Deutsche Bank's Mammone. He said that makes his more conservative forecast of 13 percent earnings growth and 8 percent revenue growth "achievable."

STOCK PERFORMANCE: Shares are down about 16 percent from their opening price at Visa's March 19 IPO — a far better performance over that period than the broader market, especially from financial services companies. But the stock is off nearly 14 percent from a recent high of $57.98 on Jan. 6 as bad news from banks has hurt the market's view of Visa.

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