Visa's stock falls as volume growth slows, but exec says trends are stable

By Emily Bary

Visa says Asia's recovery has been slower than expected but the company expects to still 'deliver on the full-year commitment' it made several quarters back

Visa Inc. shares fell about 3% in Tuesday's extended session after the payment-technology company showed a slight slowdown in volumes during its latest quarter.

Payments volume rose by 7%, while processed transactions increased 10% in the fiscal third quarter. That compared with 8% growth in overall payments volume and 11% growth in processed transactions during the March quarter.

Cross-border volume for Visa (V) was up 14% in the most recent period, relative to a year before.

The company's investor presentation indicated a slowdown in overall U.S. volume growth during the first three weeks of July relative to what was seen in June. The slowdown seemed more pronounced in U.S. debit relative to U.S. credit.

Visa maintained its revenue-growth outlook for the full fiscal year, however, with its chief financial officer saying that many elements of the company's initial view have held true, with two exceptions.

First, the company expected higher currency volatility than it's been seeing recently. Currency has been "persistently at multiyear lows...in terms of the level of volatility," CFO Chris Suh told MarketWatch. While the company once thought trends would improve in the current quarter, Visa now thinks they'll be similar to what played out in the past two quarters.

The other issue has been a slower-than-expected pace of recovery in Asia, partly due to macroeconomic conditions in China and many weak Asian currencies.

"The Japanese yen hit a 38-year low relative to the U.S. dollar," Suh said. "That really impacts consumers' purchase power when they travel outside of the region, and so that's having an impact on outbound travel as well."

See also: Visa and Mastercard shares draw downgrades as BofA analyst breaks from the pack

Still, Suh said that Visa's business overall is showing "stability."

"We feel pretty good about our ability to deliver on the full-year commitment that we made at the start of the year," he said. "Travel, currency volatility, those things are in some nature temporal, and we anticipate that they'll continue to revert back to the norm over time."

The company is seeing growing adoption of contactless payments, notably in the U.S., which was slower to get on board with the payment method. In New York, contactless penetration has hit 75%.

"It's a great thing for Visa," he said, since consumers who tap spend more on their cards than those who swipe or dip to make a payment.

The company reported fiscal third-quarter net income of $4.87 billion, or $2.40 a share, compared with $4.16 billion, or $2.00 a share, in the year-earlier period. On an adjusted basis, Visa earned $2.42 a share, matching what analysts tracked by FactSet were modeling.

Revenue rose to $8.90 billion from $8.12 billion a year before. The FactSet consensus was for $8.92 billion.

Jefferies analyst Trevor Williams noted it was a "rare top-line miss" for Visa.

Visa's earnings came days after American Express Co. (AXP) reported upbeat profit figures but came up short on revenue. Amex also showed a slowdown in spending growth.

See more: Amex's revenue from card fees topped $2 billion for the first time last quarter

Don't miss: Is this heavy-hitting American Express card worth the $695 fee? Yes, if you're in this group.

-Emily Bary

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07-23-24 2032ET

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