Will Visa's Growth Outpace MasterCard and American Express?

Visa (V 0.65%) will release its quarterly report on Wednesday, and one of the newest members of the Dow Jones Industrials has vaulted to all-time record highs. Even with a big current edge over rivals MasterCard (MA 1.33%) and American Express (AXP 2.56%), Visa's growth appears to be putting it in position to continue its dominance well into the future.

Visa plays an important role in the financial industry, and unlike many traditional banking and investment-related financial stocks Visa held up very well during the market's meltdown five years ago. Along with MasterCard, Visa bears no credit risk with its payment network, instead relying on overall transaction volume to drive gains. With a greater emphasis on electronic payments and the move toward mobile-based payment systems, Visa has a huge opportunity to bring millions of new customers into its fold, as well as the challenge of keeping new competitors from taking away its market share. 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 report.

Stats on Visa

Source: Yahoo! Finance.

Will Visa be everywhere you want it to be this quarter?
Analysts have barely budged on their views on Visa earnings in recent months, keeping estimates for the quarter ended in September unchanged and raising their full-year fiscal 2014 projections by just $0.02 per share. The stock, though, has made impressive gains, rising another 5% from already high levels in late July.

Visa got the quarter off to a strong start, reporting prior-quarter results that included a 16% jump in net income arising from 17% higher net operating revenue. Visa was strong in several different line items, including revenue from services, data processing, and international transactions.

But less than a week after its earnings announcement, Visa faced a huge threat when a federal court ruled in July that the Federal Reserve's cap on debit-card fees didn't appropriately reflect the intent of Dodd-Frank legislation. The Fed appealed that decision in August, but shareholders remain somewhat wary of the eventual resolution of the litigation. Although MasterCard also saw temporary declines, Visa took a bigger hit because nearly 30% of all card-purchase volume involved the use of Visa debit cards last year, compared to just 12% for MasterCard's debit cards.

Still, Visa has a massive opportunity both domestically and across the globe. In part to fend off competition from up-and-coming rivals outside the industry, Visa teamed up with MasterCard and American Express to propose global standards for digital payments. The companies argue that standardizing the way people shop online and on their mobile devices should enhance safety, although it should also help to keep Visa and its card-based peers in the game against eBay's PayPal and other nontraditional rivals.

Interestingly, though, Visa doesn't have the top brand among its peers, with American Express commanding more than triple the brand value of Visa and quadruple MasterCard's brand value. For AmEx, branding is arguably even more essential than for Visa and MasterCard, because AmEx bears credit risk and therefore needs to appeal to the best customers it can get.

In the Visa earnings report, make sure to see whether the company's growth trajectory continues on its upward path. With a fairly pricey valuation, Visa needs to keep performing well in order to keep growth investors happy with its future prospects.

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