Visa (NYSE:V) is pulling the Dow Jones Industrial Average (DJINDICES:^DJI) down after reporting disappointing earnings. As the largest component of the Dow, its stock price movements have an outsize effect. Around the rest of the market, the tech sector is down heavily today. As of 1:30 p.m. EDT the Dow was down 141 points to 16,360. The S&P 500 (SNPINDEX:^GSPC) was down 15 points to 1,864.
Visa reported earnings after the market close yesterday that has the stock down 4.5%. As the largest stock on the Dow by price, Visa has the largest weighting on the Dow at 8% of the Dow's weight. Therefore Visa's drop is significantly pulling down the Dow, without which the drop wouldn't be so big.
Visa is down today after its guidance and revenue disappointed investors despite the company's relatively strong quarter. Visa reported that its earnings jumped 26% year over year to $2.52 per share, up from $1.92 per share and better than analyst expectations of $2.18 per share. It should be noted that earnings were boosted by a one-time tax benefit, without which earnings would have only been $2.20 per share, just above analyst expectations. Revenue was up 6.9% to $3.16 billion, slightly below analyst expectations of $3.19 billion.
The revenue miss was coupled with new guidance from Visa. Even though CEO Charles Scharf said "April is off to a strong start which is certainly encouraging for us," Visa now expects revenue growth for this year of 10%-11% -- at the low end of its earlier guidance of 10%-13% growth. Visa also singled out U.S. sanctions on Russia as a potential risk for the company going forward. CFO Byron Pollitt said, "We have 100 million cards [in Russia] and it is not in anyone's best interest, inclusive of the Russians, to make those cards not available to their own citizens." He went on to say that the lowered guidance assumed "several pennies of earnings per share impact" from the sanctions in Russia. Visa has had to end relationships with two banks in Russia and has seen some impact from a lessening in cross-border money flows in Russia.
While Visa is hitting the Dow Jones hard, the wider stock market is being hurt by the tech sector.The tech sector is down across the board today, with speculative and momentum stocks getting crushed. The Nasdaq 100 is down 1.7%, with heavyweight Google down 1.5%, Amazon down 9%, and Facebook down 4.9%.
The Dow Jones is not being particularly affected for two reasons. The main reason is that besides IBM, with its 7.5% weight, tech stocks barely have an effect on the Dow. Despite being massive companies, Microsoft, Intel, and Cisco have a combined weight of 3.5%, given their low stock prices. The second reason the Dow isn't down as much is that IBM is a blue-chip technology company that has not risen anywhere near as much as speculative tech stocks over the past year. Thus today the Dow is barely budging while other indexes are getting hit hard.