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Visa shares soar on strong 2Q

The Associated Press

Visa shares hit an all-time high Thursday after reporting a much stronger fiscal second quarter than anticipated.

THE SPARK: The company earned $1.27 billion and revenue increased nearly 15 percent to $2.96 billion.

That blew past analyst forecasts of earnings of $1.81 per share on revenue of $2.85 billion, according to FactSet.

Visa also raised its full year earnings forecast, citing more certain revenue outlook and accelerated share buyback plans.

THE BIG PICTURE: Visa doesn't issue cards. It makes money from processing charge card transactions, so it benefits from heightened consumer spending.

Steady job growth, a sustained stock market rally and rising home values have helped boost consumer confidence this year, even though Americans took a hit from higher Social Security payroll taxes that went into effect in January.

THE ANALYSIS: Analysts that follow the industry remain hesitant to say that consumers have turned a corner since the recession, when fewer people reached for the plastic with the job market atrocious and housing prices plummeting. Credit card debt has increasingly been attacked by card holders as the rely more on cash.

Credit card debt is still more than 17 percent below the peak set in June 2008.

Janney Capital Markets analyst Greg Smith said that he likes Visa's strong operating margins, earnings growth and global reach. He maintained a "neutral" rating on the stock, however, saying that the shift to cards is slowing in the U.S. and that could change the company's growth picture for 2013.

And Smith believes people will still using excess cash to pay down debt rather than spending, at least until income levels begin to improve.

SHARE ACTION: Visa Inc. spiked to $179.66. Visa's share value has increased more than 35 percent since this time last year.