There is an understandable tendency to think Dow component Visa (V 98.11) is a financial company. After all, its name is emblazoned on billions of credit and debit cards used daily around the world. The fact of the matter, though, is that Visa is a technology company, and, like many highflying technology stocks, it is enjoying strong growth.
The company's fiscal third quarter results speak to the latter point.
For the three months ended June 30, 2017, Visa reported a 26% increase in net operating revenue of $4.6 billion, including Visa Europe which it acquired in June 2016. On a constant dollar basis, its payments volume growth was up 38% while its cross-border volume growth was up 147% or 11% inclusive of Europe in the same period a year ago.
Total Visa processed transactions surged 44% to 28.5 billion, or 13% including Europe in the prior-year results.
The increase in processed transactions is a reflection of the increased use of electronic payments, instead of cash and checks, for goods and services, as well as what the company described as economic tailwinds in the U.S. and globally.
It doesn't sound as if Visa is expecting those tailwinds to abate soon either. Its revised outlook for fiscal 2017 calls for annual net revenue growth of approximately 20% on a nominal basis, including approximately 2.0 percentage points of negative foreign currency impact, versus its prior guidance calling for the high end of the 16% to 18% range, including 2.0 to 2.5 percentage points of negative foreign currency impact.
Visa culled its guidance for client incentives as a percent of gross revenue to the 20.0% to 20.5% range from the low end of the 20.5% to 21.5% range. It expects to leverage that improvement into higher earnings per share growth.
Specifically, Visa anticipates diluted class A common stock earnings per share growth to be low double-digits on a GAAP nominal dollar basis for fiscal 2017 and approximately 20% on an adjusted, non-GAAP nominal dollar basis, both including approximately 2.5 percentage points of foreign currency impact, versus prior guidance for high single-digits on a GAAP basis and the high end of mid-teens on a non-GAAP basis, including 2.5 to 3.0 percentage points of negative foreign currency impact.
The non-GAAP guidance, Visa said, is derived from adjusted full-year 2016 earnings per diluted share of $2.84.
In its fiscal third quarter, Visa reported earnings per diluted share of $0.86 on a GAAP basis.
Shares of Visa, which are up 25.8% year-to-date, are up 0.5% in pre-market trading. That's a modest response to strong results and encouraging guidance, yet it belies the fact that this technology growth stock has increased 5.2% over the last 10 sessions, suggesting its investors had been expecting to hear such good news.