Visa Weathers Stronger U.S. Dollar, Boosts Its Profit Forecast

(Bloomberg) -- Visa Inc. braved a stronger U.S. dollar and a decline in consumer confidence even as its customers’ spending overseas continued to slow during the first three months of the year.

  • After reporting a slowdown in cross-border volume growth, Visa said it now expects profit for the year to climb by a percentage in the “low twenties.” It previously said it expected growth in the “high teens.”

Key Insights

  • Investors keep a close eye on cross-border spending on Visa’s network because such transactions typically carry higher fees. But overseas spending is closely tied to currency swings, and Visa has warned that spending in the U.S. by foreign consumers has slowed as the U.S. dollar strengthened for the fourth straight quarter against other major currencies. Cross-border spending on the firm’s cards climbed 4 percent in the fiscal second quarter, a decline from the 7 percent growth the firm reported in the previous three months.
  • Amid the slowdown in cross-border spending, overall spending on the firm’s network climbed 3.5 percent to $2.09 trillion, missing the $2.2 trillion average of analysts’ estimates in a Bloomberg survey. That was led by gains in the U.S.
  • Visa also had to shell out more to convince retailers and banks to use its products. The firm set aside $1.48 billion on client incentives, up 15 percent from a year earlier and less than the $1.6 billion analysts were expecting.

Market Reaction

  • Visa shares fell to $160 at 4:13 p.m. in late trading in New York, after closing at $161.49 on Wednesday. The firm’s shares have climbed 22 percent this year, compared with the 27 percent gain for the 68-company S&P 500 Information Technology Index.

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  • Read the full statement here.

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