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Visa Q2 - Beating Expectations

Visa released its Q2 earnings, showing that consumer confidence was subdued outside of the US. Increasing consumer spending in North America though, sent profits surging 14% higher. The Visa share price was only down 0.3% after-hours thanks to a very bullish picture painted by management for the second half of the financial year.

Q2 profits rose 14% to $2.98 billion and net revenues rose 8% to $5.49 billion, beating expectations. This was thanks to strong growth in card spending across Visa's global network and payment volumes increasing 8%, adjusting for currency fluctuations.

The company reported a slowdown in cross-boarder volume (typically larger fees) growth from a 7% growth in the previous three quarters to 4% growth now. Don't be afraid, Visa revised its full-year earnings as it expects profits for the year to increase in the "low twenties", from the "high teens". This is a really good problem to have as a business.

Overall spending in the Visa network increased by 3.5% to $2.09 trillion, most of the gains came from the US, this number missed the analysts' estimates of $2.2 trillion. The company set aside $1.4 billion for client incentives, up 15% from the previous year. This provision came much lower than the $1.6 billion analysts expected.

Visa is still up 22% this year, higher than the 17% growth we've seen in the S&P500. We like Visa and it is still one of our anchor position in every US portfolio. We think Europe and India still remain the two markets that will deliver significant growth for Visa in the future, stay long.


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