Why The Market Liked Visa’s Quarterly Report Card

Visa, reporting fiscal second quarter results on the heels of two major changes in structure and at the helm — the first through the acquisition of Visa Europe and the latter through the two-quarters-old tenure of Al Kelly as CEO — showed growth across all major business lines as consumer spending continued on a robust path.

That growth, extending across credit and debit card transactions, was enough to propel results past estimates on Thursday, as adjusted net income came in at $0.84 a share, and revenue surged 23 percent, boosted by the European business to $4.5 billion, besting the $4.3 billion consensus.

The $20 billion acquisition of Visa Europe, said CFO Vasant Prabhu on the call after results were announced, is tracking “above” Visa’s own expectations.

Taken on a consolidated basis, credit and debit card spending, which took into account Visa Europe but adjusted for the vagaries of currency fluctuations, showed 37 percent growth at $1.7 trillion in the March period. Credit transactions, as measured on a consolidated basis, were $974 billion, with a 25 percent change, and debit was up 58 percent to $755 billion.

And the cross-border payments metric was up 132 percent annually (or 11 percent as including Europe in the prior period), even in the face of what Kelly called “geo-political uncertainty.” International transaction revenues grew 41 percent.

The company said that total Visa processed transactions stood at $26.3 billion, up 42 percent as reported, or 12 percent with Europe in prior year results. The total card count was up 27 percent to 3.1 billon cards.  That total figure was outpaced by debit cards, which gained 31 percent.

On the conference call with analysts, Al Kelly, who noted that card transactions continue to “displace cash,” recounted card deals struck with, among others, PNC Financial Services Group Inc. and singled out a card deal co-branded with Hyatt Hotels Corp.

Visa Checkout, he said, is making “great progress” with 20 million enrolled accounts — which compares to the 18 million tally at the end of the first fiscal quarter — growing globally across an installed base of more than 300,000 merchants. In addition, he noted that push payments via Visa Direct are also expanding globally.

Speaking of global reach, Kelly pointed out that India has been a market of promise and performance, as it transitions away from cash, with points of acceptance for cards growing in that country by more than two million locations since the government started its currency phase-out (of larger bills) in Nov. 2016. Kelly told analysts that the movement away from cash transactions has bolstered demand for mobile transactions through mVisa.

And while China remains a market devoutly to be wished, management acknowledged on the call that the country remains a “long-term opportunity,” where it will “take time” for the realization of a domestic license (elsewhere, volume for Visa in China was hamstrung by the decision last year of the PBOC to stop issuing co-branded cards).

In Europe, growth was nine percent year over year. Kelly said in response to a question about PSD2 that “it is too early to tell how it will play out.” The authentication process, he said, is one that should be done pragmatically.

And looking at the forecast for the year: Annual net revenue growth should be at the “high end” of the 16 percent to 18 percent range, the company said.