Ahead of the Tape: Don't Expect Shock From Visa -- WSJ

By Steven Russolillo 

The so-called quiet period before Visa Inc.'s coming earnings report has been anything but that.

Just last week, Visa announced its chief executive was resigning, it boosted its dividend and it announced a new bitcoin-style network. Next up is Monday's earnings report. If history is a guide, the release should offer fewer surprises.

Analysts polled by FactSet estimate Visa earned 73 cents a share in the third quarter, up 17% from a year ago. The actual number likely won't deviate much. The card giant has exceeded Wall Street's estimates with uncanny regularity, missing earnings forecasts only twice in the past five years. Both misses were slight.

Like rival MasterCard Inc., Visa is a payment network that processes credit-card and debit-card transactions, making a percentage off each. It doesn't issue cards, lend money or set interest rates, so it doesn't assume credit risk. That has allowed it to benefit in recent years as consumers increasingly pay with plastic.

Visa's stock has been a big winner since it returned to the public markets in March 2008, rising 23% compounded annually and far outpacing the S&P 500. Yet it now faces stiff competition, with many financial-technology startups aiming to disrupt traditional payments. So far, Visa hasn't just navigated this environment well, but also maintained its position as the dominant payments player. It has partnered with some fintech companies with the hope of boosting the use of electronic payments globally.

In a deal announced over the summer, PayPal Holdings Inc. agreed to stop steering customers away from Visa cards. In return, Visa will make PayPal part of its "digital wallet" and won't increase fees that it charges to PayPal. This should boost transactions made on Visa-branded cards. Visa also has supported Apple Inc.'s Apple Pay and invested in mobile-payments company Square Inc.

Wall Street has applauded these moves. Roughly four of five analysts who cover the stock rate it a "buy," the highest percentage since 2011. And while shares fetch a higher-than-average 25 times projected earnings, that is roughly in line with both MasterCard and PayPal.

Many assume the future of finance will be dominated by digital disrupters. Don't discount the old guard just yet.

Write to Steven Russolillo at [e-mail]

(END) Dow Jones Newswires

October 24, 2016 02:47 ET (06:47 GMT)

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