Revived consumer spending drove Visa Inc.'s fiscal second-quarter profit up 33 percent and the credit and debit card processor forecast strong revenue growth for the full year.
Visa's growth continued to lean heavily on surging debit card usage as customers still prefer paying with checking account funds rather than with credit cards. The increased fees that Visa is collecting from merchants for processing customers' payments echoes the improved sales results many companies have reported in recent weeks as consumers appear to be more confident about spending.
In the U.S., Visa said 19 percent more transactions were made with debit cards and the size of those purchases in dollars rose 18 percent. In foreign markets, 20 percent more transactions were made with debit cards and the value of those transactions in dollars surged 33 percent.
Chairman and CEO Joseph Saunders noted that volume growth fueled the earnings gains, but said the company is "increasingly optimistic that economic growth will gradually improve."
The San Francisco company, which last week agreed to pay $2 billion for e-commerce payment processor CyberSource Corp. in a move to boost online use of its branded cards, earned $713 million, or 96 cents per share, in the first three months of the year. That's up from $536 million, or 71 cents per share, a year ago.
Revenue rose to $1.96 billion from $1.65 billion last year.
The results beat the average estimates of analysts polled by Thomson Reuters, who had forecast profit of 91 cents per share on $1.93 billion in revenue.
U.S. credit card usage edged 0.3 percent higher on a dollar basis, after falling for the past five quarters. Measured in the number of transactions, U.S. credit card purchases rose 1.5 percent.
Foreign credit card usage jumped 11 percent by dollar volume, and 11 percent by transaction volume.
Edward Jones analyst Andy Miedler called the results "another testament to how consistently Visa delivers strong results."
He noted that Visa's market share leadership in debit cards helped push profit higher, reflecting newly frugal habits spawned by the recession. "Many consumers that used to rely on credit are now learning the error of their ways and trying to stay on a budget and use their debit cards," Miedler said. "That's fueling growth at Visa."
Visa now expects full fiscal-year revenue at the high end of its prior forecast for growth of 11 percent to 15 percent. That range implies revenue between $7.67 billion and $7.95 billion for the year. Wall Street has forecast full-year revenue of $7.91 billion, on average.
In late trading, Visa shares fell $1.36, to $92.25. The stock closed the regular session up 66 cents at $93.61.
Miedler said investors who are used to Visa's results coming in well ahead of expectations may have pushed the stock down in aftermarket trading, disappointed that revenue came in only slightly above estimates.
Credit card provider and payments processor American Express Co. last week also said a big jump in cardholder spending helped its first-quarter earnings more than double. Rival payments processor MasterCard Inc. reports its quarterly results next week.
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