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Visa's 4Q net income falls 10 percent on one-time charge; results top Wall Street forecasts

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LOS ANGELES — Visa Inc.'s profit fell about 10 percent in its fiscal fourth quarter, weighed down by one-time litigation expenses.

But the latest results beat Wall Street expectations and the Foster City, California, company also announced a $5 billion share buyback program, sending its stock up 4 percent in extended trading Wednesday.

Visa is the world's largest processor of debit and credit card payments. As such, it benefits from heightened consumer spending, and its results are closely watched because they can be a window into the buying habits and financial health of consumers.

Consumers have been spending more at retailers this year as unemployment has declined and employers have been adding jobs at a solid pace.

Visa said that payments on its system rose 11 percent to $1.2 trillion in the July-September quarter versus a year earlier. That helped boost Visa's service revenue, as well as revenue from data processing and international transactions. Total processed transactions jumped 9 percent to 16.9 billion.

In a conference call with Wall Street analysts, Visa's Chief Financial Officer Byron Pollitt said that payment volume growth has been solid in the U.S. and internationally.

Even so, Visa has a cautious outlook headed into next year due to the modest pace of the economic recovery, geopolitical concerns, among other worries.

"We approach 2015 bullish on the long-term, given the underlying strength in payment volumes and processed transactions, and cautious in the short-term," Pollitt said.

Meanwhile, Visa has been taking steps to move further into the digital payments market.

CEO Charlie Scharf noted that the company has been testing a contactless payment system that works with applications on mobile devices running the Android operating system. Like Apple's own mobile payment service, Apple Pay, Visa's system would allow users to use their mobile device to make a payment at a retailer, replacing the need for a credit or debit card. The company expects the service will be commercially available in the U.S. in January.

PHOTO: FILE - This Aug. 16, 2010 file photo shows the Visa logo on the front of a Debit Card in Philadelphia. Visa reports quarterly financial results on Wednesday, Oct. 29, 2014. (AP Photo/Matt Rourke, File)
FILE - This Aug. 16, 2010 file photo shows the Visa logo on the front of a Debit Card in Philadelphia. Visa reports quarterly financial results on Wednesday, Oct. 29, 2014. (AP Photo/Matt Rourke, File)

Apple Pay debuted Oct. 20 and generated more than 1 million card activations in the first three days after it became available and is now more widely used than any competing payment system. Visa cards accounted for more than 600,000 of those cards, Scharf said during the conference call.

"Early days, but very encouraging," he said.

With the shift toward digital payments advancing, Visa is increasing its investment in technology. It plans to boost hiring in the U.S., adding 1,000 technologists and engineers.

Visa reported earnings of $1.07 billion, or $1.72 per share, for the three months ended Sept. 30. That compares with net income of $1.19 billion, or $1.85 per share, a year earlier.

Excluding the impact of the $450 million litigation provision and other one-time costs, Visa's earnings came to $2.18 per share.

The average estimate of analysts surveyed by Zacks Investment Research was for earnings of $2.11 per share.

Revenue rose 9 percent, to $3.23 billion from $2.97 billion. Analysts expected $3.19 billion.

Visa shares added $8.59 to $223.20 in extended trading. They closed Wednesday at $214.66, down nearly 4 percent in 2014 before the earnings report.

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Elements of this story were generated by Automated Insights using data from Zacks Investment Research. V stock research report from Zacks.

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Keywords:Visa,Earnings Report,Priority Earnings

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