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Visa Inc. Raises Full-Year Outlook

By Joe Tenebruso – Updated Apr 28, 2018 at 5:52PM

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CEO Alfred Kelly says the fundamentals of the payments titan's core business remain "robust around the world."

Visa (V -0.35%) reported fiscal second-quarter results on April 25. The world's largest payments network is enjoying accelerating revenue growth, prompting it to boost its sales and profit forecast for the year ahead. 

Visa results: The raw numbers

Metric

Q2 2018

Q2 2018

Year-Over-Year Change

Revenue

$5.073 billion

$4.477 billion

13%

Adjusted net income

$2.605 billion

$2.066 billion

26%

Adjusted EPS

$1.11

$0.86

30%

Data source: Visa Q2 2018 earnings press release.

What happened with Visa this quarter?

Payments volume for the quarter ending Dec. 31 grew 10% after adjusting for the effects of currency fluctuations, to $2.033 trillion. In turn, Visa's service revenue increased by 13%, to $2.3 billion.

For the quarter ending March 31, payments volume rose 11% to $1.99 trillion, fueled by rising global debit card usage. "Debit growth of 11% was up 2 percentage points versus last quarter with both U.S. debit and international debit growth accelerating by similar amounts," CEO Alfred Kelly said during a conference call with analysts.

Cross-border volume -- which includes transactions that occur when a merchant domiciled in one country makes a sale to a customer that pays with a credit card issued in another country -- also saw solid growth, rising 11% on a constant dollar basis. That helped Visa's international transaction revenue increase by 19%, to $1.8 billion.

Additionally, a 12% jump in total processed transactions, to 29.3 billion, fueled a 15% rise in Visa's data processing revenue, to $2.1 billion.

"Visa had a terrific second quarter," Kelly said in a press release. "Revenue growth was better than anticipated and many of our key business drivers accelerated compared to the first quarter, including strong growth in cross-border and payments volume."

A person drawing an upwardly sloping curve labeled sales

Visa is seeing accelerating growth in several of its most important markets. Image source: Getty Images.

Still, Visa's adjusted operating expenses increased by 18% year over year, mostly due to higher personnel and marketing costs. In turn, adjusted operating income increased 11%, to $3.3 billion, as operating margin declined 1 percentage point, to 66%. 

All told, adjusted net income -- which benefited from a significantly lower effective tax rate brought about by the Tax Cuts and Jobs Act -- jumped 26% to $2.6 billion. And adjusted earnings per share -- boosted by the $3.75 billion in share repurchases Visa conducted over the first two quarters of fiscal 2018 -- soared 30% to $1.11.

Looking forward

These strong results prompted Visa to boost its fiscal 2018 full-year financial outlook, which now includes:

  • "Low double-digits" net revenue growth, up from prior expectations for "high single digits" growth.
  • Adjusted earnings-per-share growth in the "high-20s," up from "high end of mid-20's."

"The fundamentals of our core business remain robust around the world and our team continues to execute against the company's long-term growth strategy," Kelly said. "Based on our first half results, we are raising our revenue and profit outlook for the year."

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Visa. The Motley Fool has a disclosure policy.

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