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Visa lowers revenue forecast, amends Visa Europe deal

Visa credit cards are displayed in Washington October 27, 2009. REUTERS/Jason Reed

By Nikhil Subba

(Reuters) - Visa Inc, the world's largest payments network operator, lowered its full-year revenue forecast, blaming lack of improvement in cross-border spending.

Shares of the company, which is amending its deal to buy Visa Europe, fell 4.7 percent to $77 in after-market trading on Thursday. The stock — a Dow component — had risen 4.2 percent this year.

Chief Financial Officer Vasant Prabhu on a conference call blamed weaker U.S. payment volumes due to gas prices and weakness in large commodity-based economies like Brazil for the lowered forecast.

Visa, which reported a better-than-expected profit for its second quarter ended March 31, said it swapped the earn-out option in its deal to buy Visa Europe for an increased cash consideration, following feedback from the European Commission.

"The elimination of that earn out means the European banks can switch away from Visa sooner than they would have previously," said Gil Luria, a Wedbush Securities analyst.

The cash consideration of the deal will be increased by 1.75 billion euros ($1.97 billion), the company said.

Visa said last year it would pay 16.5 billion euros upfront in cash and convertible preferred stock, with potential for an additional payment of up to 4.7 billion euros based on revenue targets four years after the deal closes.

The company said it expects its full-year revenue to grow between 7 percent to 8 percent, lower than its previous forecast of high single-digit to low-double digit.

On a constant-dollar basis, adjusted earnings per Class A share is now expected to grow in low single-digits, compared with its previous forecast of low-end of mid-teens.

The company's net income rose 10 percent to $1.71 billion in the second quarter, helped by a 10.5 percent jump in U.S. payment volumes.

Payments on Visa's U.S. cards account for more than half of the company's total transaction volume.

Excluding items, the company earned 68 cents per Class A share, beating analysts' average estimate by a cent, according to Thomson Reuters I/B/E/S.

Total operating revenue rose 6.4 percent to $3.63 billion.


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