Visa Inc (NYSE:V) Payment Network Feels Heat Due To Lower Gas Prices

Visa Inc (NYSE:V) reported that its earnings came flat even though revenue jumped 7.8% in 2Q. The payment volumes surged 11% and were under pressure due to lower gas prices and a strong U.S. dollar. Despite flat revenue, the company stated that spending momentum resulted in revenue growth for the quarter ended March 31, 2015. Chief Executive Charles Scharf termed the results as gratifying, solid and consistent in the presence of challenging economic conditions as well as geo-political concerns across the world.

The performance

Visa recorded a profit of 63 cents a share, compared with 63 cents per share, in the same quarter a year ago. However, the year-earlier period included a one-time tax benefit. The earnings came better than the analysts’ forecast of 62 cents per share. The revenue surged to $3.41 billion from $3.16 billion and was better than analysts’ expectation of $3.34 billion. The strong U.S. dollar dampened revenue growth by as much as 2.5%. Vasant Prabhu, the Chief Financial Officer of Visa, said that the management expects dollar to strengthen more in the year.

The factors

Visa Inc (NYSE:V) announced that operating expenses jumped 1% to $1.1 billion due to increased personnel costs. The mounting marketing expenses, dollar’s strength and other problems are expected to result in pressure on revenue and earnings growth in 3Q. The revenue growth will return to double-digits not before than 4Q. The payment volume rose 11% to $1.2 trillion while total transactions surged 11%, to $17 billion. The international revenue and data processing revenue jumped 11% and 9%, respectively.

The highlights

Mr. Scharf added that almost 30% of the U.S. consumers surveyed by Visa are spending a part of their gasoline savings on fast-food restaurants and groceries, up from 25% recorded in 1Q. However, they are recorded on debit cards and not on credit cards.

 

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Standley Adam

Standley Adam

Adam is a staff reporter for US Markets Daily Publications & Media, covering foreign affairs and domestic policy.