Earnings Preview: Visa reports fiscal 2Q earnings

Visa expected to report higher net income in fiscal second quarter

Associated Press

LOS ANGELES (AP) -- Visa Inc. is expected to report higher net income for the first three months of the year, a period when consumers typically rein in spending to pay down holiday season debt. The credit-card processor will report its fiscal second-quarter results after the markets close on Wednesday.

WHAT TO WATCH FOR: Details on consumers' use of Visa-network charge and debit cards during the quarter. Also, an update on its new partnership with JPMorgan Chase & Co. and recent moves to expand its payments-processing platform for use on mobile devices.

Sales at U.S. retailers — a key indicator of consumer spending — declined a seasonally adjusted 0.4 percent in March. That followed a 1 percent gain in February and a 0.1 percent decline in January.

Still, that didn't slow spending by holders of credit card issuers American Express and Capital One Financial, which could suggest a pickup in spending via Visa-branded cards.

Visa makes money from processing charge card transactions, so it benefits from heightened consumer spending.

Stepped up usage of credit and debit cards helped drive a 25 percent jump in Visa's net income for the last three months of 2012.

In a note published last week, Barclays analyst Darrin Peller wrote that several factors likely affected Visa's volume growth in the quarter. Among them: A colder-than-average March versus a year ago, when temperatures were warmer than average. Also, many Americans' federal income tax returns were delayed this year, potentially pushing back spending further into the second quarter.

However, the Easter holiday was observed April 1 this year, possibly pulling some spending into March.

Card-usage trends aside, Wall Street will be listening for an update on what Visa is doing to make its payment-processing business more accessible to mobile device users, who increasingly shop online on tablets and smartphones, rather than PCs.

In February, the company reached a deal with mobile commerce provider ROAM aimed at enabling merchants to accept electronic payments via mobile devices. Visa also launched a mobile money platform meant to streamline how financial institutions can offer financial services to consumers via mobile devices.

In addition, Visa and JPMorgan disclosed in February that they had agreed to partner up in a deal that calls for Chase to launch a payments processing platform powered by Visa. Through that platform, Chase would offer discounts to its cardholders when they go to ring up a purchase from merchants who have signed up to join the Chase Merchant Network.

WHY IT MATTERS: Visa, based in San Francisco, is the world's largest processor of debit and credit-card payments. Its results reflect the health of the consumer.

WHAT'S EXPECTED: Analysts, on average, expect net income of $1.81 per share on revenue of $2.85 billion, according to FactSet.

LAST YEAR'S QUARTER: Visa's adjusted income was $1.60 per share. Revenue was $2.6 billion.

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