Visa (NYSE:V) reported record gross revenues ($3.399 billion), net revenues ($2.85 billion), and record operating income ($1.80 billion) for the quarter ending December 2012. Net income ($1.293 billion) was the second best ever, as was GAAP earnings per share ($1.93). However, a tax benefit of $0.11 was included in earnings per share. Margins were solid. Total transactions volume increased +6% worldwide over December 2011.
Net revenue growth year over year slowed to +11.7%, and was the second slowest in past 13 quarters. This beat analysts' expectations of +10.7%.
Earnings per share growth year over year was +29.5%, boosted by the tax benefit. Analysts' expectations were +20.1%.
Net revenues (net of client incentives) rose to a record high $2.85 billion. Operating income ($1.80 billion) was also a record high. Net income dropped to $1.29 billion, which was the second best ever.
Gross margin (83.73%), operating margin (52.96%), and net margin (38.04%) are resilient and above the 17-quarter averages of 83.65%, 40.33%, and 28.13%, respectively.
The segment revenues of behemoth Visa grind higher, fueled by 21+ billion transactions in the latest quarter.
Management's fiscal year ending September 2013 estimate of client incentives as a percentage of gross revenues is 18.0% to 18.5%. This is higher than the historical average. The 14-quarter average is 16.57%, which indicates less profitability in the outlook.
Management's fiscal year ending September 2013 net revenue outlook is "growth in the low double digits." The fiscal year growth rates have been +16.7%, +13.9%, and +13.4% for 2010, 2011, and 2012, respectively. At a +13% growth rate, that would be net revenues of $11.78 billion, compared to the prior year's $10.42 billion.
Management's fiscal year ending September 2013 "adjusted" earnings per share outlook is "growth in the high teens." Prior years, exclusive of litigation expenses and tax effects, have been 25+% growth. So at an estimated +17.3% growth rate, which is the analysts' expectations, that indicates slower EPS growth in agreement with the management outlook.
The ubiquitous Visa is expected to continue revenue and earnings per share growth at a slower rate. This implies a slower growth in the stock price, but growth nonetheless. New CEO Charlie Scharf continues actively expanding this payment systems giant worldwide. Visa has an extraordinary brand advantage, and could possibly accelerate the growth. It is difficult to conceive of this business model faltering very much with Visa's system embedded with most merchants and financial institutions. You see their logo everywhere -- at the store, online, and in your wallet.
A long position is a slow developing play to enter on a pullback and consolidation such as mid-quarter between earnings announcements or other selling phases. As noted, long-term growth (revenues and earnings per share) is projected to slow. V stock is low volatility and is expected to inch upwards, with minor dips and consolidations, as the 0.76 beta indicates. This stock is for hitting singles, not home runs.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.