Visa, the world’s largest payments processor, reported a higher-than-expected quarterly profit on Tuesday, as consumers resumed their travel spending after the pandemic-induced slump. The company also announced a dividend hike and a new share buyback program, signaling confidence in its future growth.
Visa sees strong recovery in travel demand
Visa’s CFO Chris Suh said that the company saw an accelerated recovery in U.S. inbound travel in the fourth quarter, as well as continued improvement in travel into Asia. He added that Visa is assuming no recession in its outlook, despite the challenges posed by the higher interest rates and inflation.
Visa’s cross-border volumes, excluding transactions within Europe, rose 18% in the quarter, reflecting the rebound in travel demand. Cross-border volumes are a key indicator of Visa’s performance, as they generate higher fees than domestic transactions.
Visa also benefited from the growth in e-commerce and digital payments, as consumers shifted to online shopping and contactless payments amid the pandemic. The company’s payment volumes increased 9% in the quarter, while processed transactions rose 11%.
Visa beats earnings estimates and raises dividend
Visa posted an adjusted profit of $2.33 per share in the three months ended September 30, beating analysts’ estimates of $2.24 per share, according to LSEG data. The company’s revenue increased 12% to $6.6 billion, slightly above expectations of $6.5 billion.
Visa also raised its quarterly dividend by 16% to $0.52 per share and authorized a new $25 billion multi-year share repurchase program. The company said that it returned $2.8 billion to shareholders through dividends and buybacks in the fourth quarter.
Visa’s CEO Alfred Kelly said that the company delivered a strong finish to fiscal year 2023, despite the ongoing uncertainty caused by the pandemic. He added that Visa is well-positioned to capitalize on the long-term growth opportunities in the payments industry, as it continues to invest in innovation and partnerships.
Visa faces competition and regulatory challenges
Despite its impressive results, Visa faces some headwinds in the coming quarters, as it competes with rival Mastercard and other players in the fast-changing payments landscape. The company also faces regulatory scrutiny in some markets, such as India and Europe, where it has been accused of abusing its dominant position and charging excessive fees.
Visa is also involved in a legal dispute with fintech giant PayPal over its acquisition of Plaid, a data-sharing platform that connects bank accounts with financial apps. Visa agreed to buy Plaid for $5.3 billion in January 2020, but the deal was blocked by the U.S. Department of Justice on antitrust grounds. Visa has denied any wrongdoing and is challenging the lawsuit.
Visa’s shares pared some initial gains and were last flat in volatile aftermarket trading on Tuesday. The stock has gained about 15% year-to-date, outperforming Mastercard’s 11% rise but lagging behind the S&P 500’s 22% gain.
