Friday, July 26, 2013

Earnings Commentary: Visa (V)

*Price per Share Info*
Adjusted closing price on 07/23/13 (night before earnings announcement): $188.58
Current Price: $193.49
Note: Visa has reached an all time high of $194.73 after their announcement.
I picked up some Visa stock around November of last year. I had been doing my research and thinking about investing in Visa for some time prior to that but finally decided to take the "plunge" after a favorable earnings announcement during the time that I bought it and I haven’t looked back since! I have to say that it is one of the best investment decisions I have ever made. I should mention that don’t own a lot of shares—if that were the case I would be typing this from some island in Hawaii (one day!). However, profit is profit and I take it any way you want to slice it!

If you open your wallet and if you own a credit card of debit card you will notice without fail that one of the cards you own will have either a Visa or MasterCard logo on it. How do these companies make money? Well, they collect a free from EVERY SINGLE TRANSACTION you make with your card. Cards are swiped from top of the morning when you are buying your metro card to get on the train all the way to those late nights when you are out drinking with friends. Need I say more?

With that said, this past Wednesday July 24th, Visa announced their fiscal 3rd quarter earnings for period ending June 30th, 2013. The results pretty much threw the ball out the park. Here are some of the favorable highlights:

1.    Net income for the quarter was 1.2 billion, an increase of 16% over last years adjusted results.

2.    Net operating revenue in fiscal third quarter of 2013 was $3 billion, an increase of 17% over the prior year—this was driven by a strong growth in service, operating, data processing and international transaction revenues.

3.    Total processed transactions (or “processed card swipes” in simpler terms) were 15 Billion, a 14% increase over the prior year. These transactions are processed by “visanet” which is Visa’s card processing network.

4.    Service revenues were 1.3 Billion, a 7% increase from prior year

5.    Data processing revenue up 15% over prior year

6.    Total Operating expenses for the quarter were 1.2 billion which is an increase of 9% over the prior year adjusted results.

What’s in the future for Visa? Well, in their own  words: “We are accelerating opportunities to expand our network through mobile, ecommerce and data-driven solutions, while continuing to deliver value to our shareholders”. Also, remember Visa(V) is another international company (can you tell I love going international?!)

**If you want to see the full report including financial statements and further detail click on the source noted above.

I see V as a quality stock and a quality company and I am a proud shareholder. However, remember that no company comes without some kind of risk and when it comes to visa, MasterCard, Amex, discover, whatever you may have-- these companies run the risk of lawsuits and/or penalties triggered by regulations of government officials whom fight for consumer rights and may feel that some of the fees may be unreasonable or even illegal and not in accordance with regulations.

Hence, it is important to keep an eye out for that kind of risk which may affect a company’s bottom line and stock price.  However, these companies generate so much cash that the risk is not as alarming and for the most part they are quite aware of that risk and remain prepared. However, when it comes to investing we must always remain informed so that we are never caught off guard!

Thanks for Reading!

Tell me, how many cards with the Visa logo do you have in your wallet?

Disclaimer: this is not a recommendation to invest in V. It is my personal opinion. Do not invest or cease to invest solely on the information found on this blog post.