Why Tomorrow's Visa Earnings Could Move the Dow

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) opened the day on a positive note, with stocks rising 88 points as of 12:30 a.m. EDT in advance of the latest Federal Open Market Committee meeting for setting future monetary policy. As earnings season continues, Dow investors next turn their attention to Visa  (NYSE: V  )  to see whether one of the most recent additions to the average will prove itself worthy in its first quarterly report as a Dow member. Visa's results could have marked impact not only on its shares and those of rivals MasterCard (NYSE: MA  ) and American Express (NYSE: AXP  ) , but also on the Dow as a whole.

Visa will release its results after the market closes tomorrow. It will follow up with a conference call scheduled to begin at 5 p.m. EDT.

Visa has been a growth giant in the card industry for years, and investors expect the pace of growth to continue this quarter. The company has built on its position as the leading card network in the world, topping MasterCard's market share as Visa has grown beyond its credit card roots to take command of the debit-card market as well. Visa has plenty of opportunities to keep extending its reach, especially in foreign markets in which cash transactions still make up a substantial share of overall commerce.

Ongoing litigation about the validity of the Federal Reserve cap on debit-card fees under Dodd-Frank legislation presents some uncertainty for Visa and MasterCard. Investors initially saw the Fed's concession to allow a higher limit on debit fees as a victory for the card giants, but a federal court's ruling against the Fed limit raised the specter of harsher regulation that could hurt Visa's profits. The dispute probably won't be resolved in the near future, but you can expect Visa to use every means at its disposal to work at keeping the existing deal in place.

Visa's largest threat likely comes not from MasterCard and American Express but rather from mobile-payment processors like PayPal. Indeed, all the credit card giants are taking the PayPal threat so seriously that they've been willing to put their competitive drives aside and join forces to find ways to protect their joint interests. Those initiatives help the entire card-network industry, but as its biggest player, Visa has the most to gain.

Visa's earnings serve not only as a measure of its own success, but also as a benchmark of overall spending activity within the economy. As a result, disappointing revenue and earnings from Visa could be a negative sign for the entire economic expansion that has helped push the Dow Jones Industrials so much higher in recent years.

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