Visa profit jumps on strong cost-cutting, meets expectations

BOSTON -- VisaV said Wednesday its fiscal third-quarter profit jumped 72%, as recent cost-cutting helped offset declining payment processing volume.

The world's largest electronic payment network on Wednesday reported net income of $729 million, or 97 cents a share, for the three months ended June 30. That's up from a profit of $422 million, or 51 cents a share, in the year-ago period.

Excluding one-time items such as the sale of an interest in a Brazilian venture, Visa's adjusted quarterly profit was $507 million, or 67 cents a share.

Analysts surveyed by Thomson Reuters expected a profit of 67 cents a share. Analysts' estimates typically exclude one-time items.

Visa's revenue rose 2% to nearly $1.65 billion, slightly above analysts' forecast of about $1.64 billion.

Visa, which has recently gone on a cost-cutting campaign, said operating expenses fell nearly 15% to $824 million in the latest quarter. Adjusted for one-time items, the decline in operating expenses was more modest, at 9%.

The reduced expenses boosted the company's profit margin. But that gain was partly offset by a 5% decline in payments volume, to $617 billion for the three months ended March 31, excluding the effects of currency fluctuations. Visa reports some operational results on a three-month lag.

U.S. payments volume fell 2.5% from the year-ago period. But, accounting for currency movements, payments volume continued to grow in all other regions globally. Other regions of the world are increasingly embracing credit and debit payments over cash and checks.

Total cards carrying the Visa brands rose 6% over a year ago, to more than 1.7 billion.

Visa earns revenue primarily from fees it charges to process payments made with credit and debit cards, which has enabled it to weather the recession better than banks that issue credit cards and make loans.

Service revenue rose 3% to $769 million in the latest quarter, based on payments volume in the prior quarter.

Visa reported earnings after its shares rose 48 cents to close at $66.78. The stock has traded in a 52-week range of $41.78 to $78.90.

San Francisco-based Visa reaffirmed revenue expectations for this year, with annual net revenue growth in the high single digits in percentage terms. For next year, that growth is forecast at the lower end of the 11% to 15% range, depending on the pace of economic recovery.

Visa slightly raised another aspect of its forecast, with expectations for an annual adjusted operating profit margin in the low 50% range through next year. That's up from the company's previous guidance of the high 40% to low 50% range.

The latest period was Visa's fifth full quarter as a public company. Visa went public in March 2008 in the biggest U.S. IPO ever. The launch came just as the U.S. economy fell deeper into a recession that is turning out to be longer-lasting and more far-reaching than most analysts had expected.