Visa: Financial Loser
The broad indexes paired earlier declines to end the session slightly lower, after some mixed economic reports. The KBW Bank Index (I:BKX) was down slightly to close at 54.80, with 15 of the 24 index components showing declines for the session.
The Department of Labor Department released its preliminary estimate that nonfarm business productivity declined at an annual rate of 2% in the fourth quarter, which was higher than economists estimate of a 1.3% decline, according to Zacks.
The Labor Department also said that initial unemployment claims for the week ended Feb. 2 totaled 366,000, declining by 5,000 from a revised figure of 371,000 the previous week. The consensus estimate was for new claims to come in at 360,000. The four-week average for initial claims was 350,000, down by 2,250 from the previous week.
The Federal Reserve said that consumer credit during December grew by adjusted 6.3% from a year earlier. Total consumer credit dollars increased by $14.6 billion during December from the previous month, which was in line with the consensus estimate.
Visa on Wednesday after the market close reported net income for its fiscal first quarter ended Dec. 31 of $1.3 billion, or $1.93 a share, increasing from $1.0 billion, or $1.49 a share, a year earlier. Excluding an 11-cent tax benefit, adjusted earnings came in at $1.82 a share, beating the consensus estimate of $1.79, among analysts polled by Thomson Reuters.
Net operating revenue grew 12% year-over-year to $2.8 billion during the fiscal first quarter, which the company attributed to "strong growth in service revenues, data processing revenues and international transaction revenues."
Visa's board of directors authorized a new $1.75 billion share repurchase program, bringing the company's total buyback authorization to $2.9 billion.
In its outlook for all of fiscal 2013, the company estimated annual revenue growth in the "low double digits," with an operating margin of roughly 60%, which matches the company's adjusted operating margin for fiscal 2012.
Bank of America Merrill Lynch analyst Kenneth Bruce rates Visa a "buy," and on Thursday raised his price target for the shares to $180. The price target "is based on a 21x multiple to our 2014E EPS forecast of $8.55, at the higher-end of the company's historical multiple range," Bruce wrote.
The analyst said Visa's long-term performance justifies a significant premium for the stock over peers. "Despite an adverse regulatory environment and sluggish economic growth the past several years, V managed 30% EPS growth per annum, demonstrating its durable operating model and providing investors a defensive posture given the continued economic uncertainty."