Visa Inc (V): This Payment Industry Giant Brings Surprises

Forecasts

For the fiscal year 2013, the management at Visa expects annual free cash flows of around $6 billion attributable to tax benefits to be realized during the year. Also, annual net revenues are expected to grow within the low double digits, while client incentives as a percentage of gross revenues are expected to hover within the 18% and 18.5% range. The management expects to spend $425 million to $475 million in capital expenditures during the year.

Competition

Mastercard Inc (NYSE: MA) stands to be the second major player in the global payments industry. MasterCard, a $64 billion market cap company announced increase in its share buyback program and doubled its dividends. Around $400 million are left under its current share buyback program and the new program will become effective at the completion of the current program.  Quarterly dividends increased to $0.6 from $0.3 for Class A and Class B shareholders. The company’s fourth quarter profits surged 9.7% on higher card use. This was despite the deteriorating macroeconomic situation.

MasterCard announced record growth in its contactless payments technology across the emerging markets including Asia, Middle East and Africa. At the end of the fourth quarter, the company’s contactless payment network covered around 600,000 merchant locations in over 50 countries.

Conclusion

Visa appears to have successfully navigated the changes in the US debit market and ensured its dominance in the US credit market.  Also, Visa has demonstrated its ability to enhance margins if weaker economic actively leads to slower revenue growth. I believe Visa’s ability to grow business through organic growth and new deals support a high earnings growth rate for the year 2013. Therefore, I am bullish on the stock.

The article This Payment Industry Giant Brings Surprises originally appeared on Fool.com and is written by Adnan Khan.