Electronic payments processor Visa Inc. (V- Free Visa Stock Report) has reported results for the first quarter of fiscal 2017 (year ends September 30th). The company kicked off the new fiscal year with a 25% jump in revenues, to $4.46 billion, comparing quite favorably to our forecast of $4.28 billion. As has been the case in recent periods, recently acquired Visa Europe was responsible for much of the top-line gain. Turning to profitability, adjusted earnings also advanced 25%, to $0.86 a share, edging out our estimate by a penny. (Both revenues and share earnings marked all-time highs for this Dow-30 component.) Visa stock is up nicely on the news in pre-market trading.
By nearly any metric, Visa's vast, geographically diverse operations are firing on all cylinders. Indeed, payments volume soared 39% in the most recent period, versus the year-earlier quarter, rising to a whopping $1.8 trillion. Cross-border transactions are expanding even faster, with that measure up 140% year over year. To put a bow on Visa's December-period report, the company processed 27.3 billion transactions during the latest three-month stretch, marking a 44% increase from the prior year. (All figures in our report are presented on a constant-dollar basis.)
Visa's international business remains its primary growth driver, but the pace has decelerated in a couple of geographies. On the one hand, total volumes in Latin America and the segment comprised of Central Europe, the Middle East, and Africa each expanded a healthy 8.7% in the fiscal first quarter. But the measure was less than stellar in the Asia/Pacific region, with total volumes up a more modest 3.7%. To no surprise, the United States still leads the way for total volume growth, which improved 11.2% from the same period in fiscal 2016. It's worth noting, however, that volumes generated overseas now account for 62% of the total, versus 58% for all of fiscal 2016 and less than 50% in the recent past.
By all accounts, fiscal 2017 will be another solid year for the company. Indeed, management expects revenues to increase 16%-18% from last year, an operating margin in the mid-60% range, a tax rate in the low-30s, and share-net percentage growth in the mid-teens. Our respective full-year top- and bottom-line targets stand at $17.5 billion and $3.30 a share, with each measure representing a 15%-17% advance from fiscal 2016.
There's a lot to like here from an investment perspective. Visa continues to return capital to shareholders, both in the form of dividend increases and stock buybacks. On point, the payout was raised 18% in the fourth quarter of 2016, to $0.165 a share, or an annualized rate of $0.66, and should rise 15%-20% per year to late decade. Too, Visa repurchased 22.3 million shares of its common stock for an aggregate $1.8 billion during the most recent three-month period, and still has $3.9 billion remaining on the current authorization. Furthermore, the company earns high marks for Financial Strength (A++), the stock is top rated for Safety (1), and Visa has a well-sorted, risk-mitigating business model. In sum, this equity would make a fine addition to most investment portfolios.
About The Company: Visa Inc. is the world’s largest retail electronic payments network providing processing services and payment product platforms. This includes credit, debit, prepaid, and commercial payments, which are offered under the Visa, Visa Electron, Interlink, and PLUS brands. Visa/PLUS is one of the largest global ATM networks, offering cash access in local currency in more than 200 countries. Visa’s global network, VisaNet delivers value-added processing, including fraud and risk management.
