visa

Visa Inc (NYSE:V) announced financial results for the Company’s fiscal fourth quarter and full-year 2016, ended September 30, 2016. GAAP net income in the fiscal fourth quarter, inclusive of special items, was $1.9 billion or $0.79 per share, an increase of 28% and 28%, respectively, over the prior year’s results. GAAP net income for the full-year 2016, inclusive of special items, was $6.0 billion or $2.48 per share, a decrease of 5% and 4%, respectively, over the prior year’s results. The full-year 2016 results include fiscal fourth quarter financial results from Visa Europe. All references to earnings per share assume fully-diluted class A share count, inclusive of series B and C convertible participating preferred stock, unless otherwise noted.

During the fiscal fourth quarter of 2016, the Company recorded the following special items:

  • A charge of $110 million (pretax) for severance costs; and
  • Non-cash and non-recurring $88 million gain due to the remeasurement of a deferred tax liability recorded upon the acquisition of VisaEurope to reflect a newly announced tax rate change in the United Kingdom.

Excluding these special items, adjusted net income in the fiscal fourth quarter was $1.9 billion or $0.78 per share, an increase of 27% and 27%, respectively, over the prior year’s results. Adjusted net income for the full-year 2016 was $6.9 billion or $2.84 per share, an increase of 7% and 8%, respectively, over the prior year’s adjusted results. The Company’s full-year 2016 adjusted financial results excluded special items related to the acquisition of Visa Europe incurred during the first three quarters and the above mentioned special items incurred in the fourth quarter.

Net operating revenue in the fiscal fourth quarter 2016 was $4.3 billion, an increase of 19%, driven by the inclusion of Europe and continued growth in payments volume and processed transactions. Net operating revenue in the fiscal full-year 2016 was $15.1 billion, an increase of 9%, driven by the inclusion of Europe and continued growth in payments volume and processed transactions. Exchange rate shifts versus the prior year negatively impacted reported net operating revenue growth by approximately 3 percentage points.

“We continue to deliver healthy earnings growth in the face of continued, but abating headwinds. We have begun to see the benefits from our acquisition of Visa Europe and strong cost discipline helped our results. At the same time, we are unwavering in our commitment to invest in client partnership opportunities and the further build out of our digital payments capabilities,” said Charlie Scharf, Chief Executive Officer ofVisa Inc.

“As we enter fiscal 2017, we are positioned well as revenue headwinds will continue to ease, we will continue to see the benefits from VisaEurope in our results, and our strong client franchise continues to grow,” added Scharf.

The Company did not report adjusted results for the three months ended September 30, 2015.

Fiscal Fourth Quarter 2016 Financial Highlights:

Payments volume growth, excluding Visa Europe and on a constant dollar basis, for the three months ended June 30, 2016, on which fiscal fourth quarter service revenue is recognized, was 10% over the prior year at $1.3 trillion.

Payments volume growth, including Visa Europe and on a constant dollar basis, for the three months ended September 30, 2016, was 47% over the prior year at $1.9 trillion.

Cross-border volume growth, including Visa Europe and on a constant dollar basis, was 149% for the three months ended September 30, 2016.

Total processed transactions, which represent transactions processed by Visa (including Visa Europe), for the three months ended September 30, 2016, were 25.9 billion, a 41% increase over the prior year.

Fiscal fourth quarter 2016 service revenues were $1.8 billion, an increase of 8% over the prior year, and are recognized based on payments volume in the prior quarter. All other revenue categories are recognized based on current quarter activity. Data processing revenues rose 25% over the prior year to $1.8 billion. International transaction revenues grew 36% over the prior year to $1.5 billion. Other revenues were $218 million, an increase of 1% over the prior year. Client incentives, which are a contra revenue item, were $993 million and represent 18.9% of gross revenues.

GAAP operating expenses were $1.6 billion for the fiscal fourth quarter 2016, a 27% increase over the prior year’s results, primarily driven by the inclusion of Europe and increases in personnel expenses due to a charge of $110 million for severance costs. Adjusted operating expenses, which exclude the special item, were $1.5 billion, an 18% increase over the prior year.

GAAP effective income tax rate was 23.1% for the quarter ended September 30, 2016 and included a $38 million benefit related to the charge for severance costs of $110 million and a non-cash and non-recurring $88 million gain upon the remeasurement of a deferred tax liability recorded upon the acquisition of Visa Europe to reflect a newly announced tax rate change in the United Kingdom. Excluding the tax impact from the special items, the adjusted effective income tax rate was 26.9% for the fiscal fourth quarter.

Cash, cash equivalents, and available-for-sale investment securities were $12.8 billion at September 30, 2016.

The weighted-average number of diluted shares of class A common stock outstanding was 2.44 billion for the quarter ended September 30, 2016.

Fiscal Full-Year 2016 Financial Highlights:

For the fiscal full-year 2016, service revenues were $6.7 billion, an increase of 7% over the prior year. Data processing revenues rose 13% over the prior year to $6.3 billion. International transaction revenues grew 14% over the prior year to $4.6 billion. Other revenues were $823 million, flat over the prior year. Client incentives were $3.4 billion and represent 18.4% of gross revenues.

GAAP operating expenses were $7.2 billion for the twelve months ended September 30, 2016, a 49% increase over the prior year’s results, primarily related to increases in personnel, network and processing expenses, and special items incurred in all four fiscal quarters primarily related to the acquisition of Visa Europe.

Adjusted operating expenses, which exclude special items incurred in all four fiscal quarters, were $5.1 billion, an increase of 5% over the prior year’s results.

GAAP effective income tax rate was 25.2% for the twelve months ended September 30, 2016. Adjusted effective income tax rate, excluding the special items related to the acquisition of Visa Europe, severance costs and deferred tax liability remeasurement described above, was 29.1%.

The weighted-average number of diluted shares of class A common stock outstanding was 2.41 billion for the full-year.

Notable Events:

During the three months ended September 30, 2016, the Company repurchased 20.5 million shares of class A common stock, at an average price of $80.76 per share, using $1.7 billion of cash on hand. During the twelve months ended September 30, 2016, the Company repurchased a total of 92.1 million shares of class A common stock, at an average price of $77.13 per share, using $7.1 billion of cash on hand. At September 30, 2016, the Company had $5.7 billion of remaining funds, authorized by the board of directors, available for share repurchase under the current programs.

On October 17, 2016, the board of directors declared a quarterly cash dividend of $0.165 per share of class A common stock (determined in the case of class B and C common stock and series B and C convertible participating preferred stock on an as-converted basis) payable on December 6, 2016, to all holders of record of the Company’s common and preferred stock as of November 18, 2016.

In addition, on October 17, 2016, the Company announced that Charlie Scharf has resigned as chief executive officer effective December 1, 2016, and the board of directors appointed current board member Alfred F. Kelly, Jr. to become CEO effective December 1, 2016.

Financial Outlook for Fiscal Full-Year 2017:

Visa Inc. provides its financial outlook for the following GAAP metrics for fiscal full-year 2017:

  • Annual net revenue growth: 16% to 18% range on a nominal dollar basis, including 1.0 to 1.5 ppts of negative foreign currency impact;
  • Client incentives as a percent of gross revenues: 20.5% to 21.5% range;
  • Annual operating margin: Mid 60s;
  • Effective tax rate: Low 30s; and
  • Annual diluted class A common stock earnings per share growth: Low 30s on a GAAP nominal dollar basis and mid-teens on an adjusted, non-GAAP nominal dollar basis (see note below), both including 1.5 to 2.0 ppts of negative foreign currency impact.

Note: The financial outlook for fiscal full-year 2017 includes Visa Europe integration expenses of approximately $80 million for the full-year. Annual adjusted diluted class A common stock earnings per share growth is derived from adjusted full-year 2016 earnings per share results of$2.84. (Original Source)

Shares of Visa are down nearly 1% to $82.25 in after-hours trading Monday. V has a 1-year high of $83.79 and a 1-year low of $66.12. The stock’s 50-day moving average is $82.49 and its 200-day moving average is $79.43.

On the ratings front, Visa has been the subject of a number of recent research reports. In a report issued on October 20, Oppenheimer analyst Glenn Greene reiterated a Buy rating on V, with a price target of $112, which implies an upside of 34.5% from current levels. Separately, on October 19, Barclays’ Darrin Peller maintained a Buy rating on the stock and has a price target of $100.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Glenn Greene and Darrin Peller have a total average return of 18.6% and 10.4% respectively. Greene has a success rate of 78% and is ranked #2 out of 4190 analysts, while Peller has a success rate of 66% and is ranked #170.

The street is mostly Bullish on V stock. Out of 14 analysts who cover the stock, 13 suggest a Buy rating and one recommends to Hold the stock. The 12-month average price target assigned to the stock is $95.40, which implies an upside of 15% from current levels.