Visa Earnings: An Early Look

With hundreds of companies having already reported quarterly results, we're now in the heart of earnings season. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Let's turn to Visa (V 0.05%). The credit card giant leads the industry with its immense payment network, but it's having to defend its turf on a variety of different fronts. Let's take an early look at what's been happening with Visa over the past quarter and what we're likely to see in its quarterly report on Wednesday.

Stats on Visa

Source: Yahoo! Finance.

Can Visa keep charging up profits?
Analysts have stayed confident about their views on Visa, keeping the most recent quarter's estimates constant and slightly raising fiscal 2013 and 2014 calls over the past three months. The stock price has responded well to the holiday season, climbing more than 10% since early November.

Visa has done an excellent job in maintaining its supremacy atop the credit card and electronic payments industry, boosting its sales substantially over the past year. With expansion into prepaid debit cards and mobile payments, Visa isn't letting competitors outflank the company by neglecting high-growth innovative areas of the money-moving business.

That doesn't mean that Visa is without threats. Rival MasterCard (MA -0.08%) has done a good job of taking advantage of the same favorable industry conditions, with the No. 2 card network seeing huge growth in emerging markets running at more than 23% versus less than 10% U.S. growth. Moreover, with retailers now having the right to put surcharges on credit card transactions to pass on their merchant processing costs to customers, credit card use in general could decline if retailers make good on that ability.

The mobile-payments space is even more crowded. With eBay's (EBAY 0.31%) PayPal and other pure payment-processing companies challenging traditional cards, Visa, MasterCard, American Express (AXP -0.84%), and Discover Financial (DFS -2.60%) are all facing the same threat: that smartphone-based payment systems could bypass existing networks entirely and render card-networks' entire business model obsolete.

Visa's numbers this quarter will be important as a sign of holiday activity, but in the longer term, it's more important for Visa to demonstrate its ability to innovate against non-card competitors like PayPal. If it can do so, Visa should be able to keep sporting strong performance.

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