Minutes ago Visa reported second quarter sales of $1.5 billion, earnings of .52 cents per share, and a net increase in profit of 28%. This was Visa's first earnings report as a publicly traded company.
Visa's strong showing is good economic news for two reasons.1. The credit-card company's successful IPO has been good for the nation's financial banks and thus essential to possibly digging out of the current credit crisis. Take this report:
Citi Investment Research analyst Keith Horowitz said Thursday banks' first-quarter earnings should increase about $5.4 billion because of the initial public offering of Visa Inc. and the reversal of litigation reserves tied to their stakes in Visa.JP Morgan Chase made $1.36 billion off the IPO alone. Others, too:
Other banks receiving big windfalls from the IPO include: Bank of America Corp. (BAC, Fortune 500), $675.3 million; Citigroup Inc. (C, Fortune 500), $324 million; U.S. Bancorp (USB, Fortune 500), $298.7 million, and Wells Fargo & Co. (WFC, Fortune 500), $295 million, according to the IPO prospectus filed with the SEC.In effect, Visa is helping stabilize our nation's largest financial banks at a time in which they are talked about as in a 'crisis' -- no small thing: Finance is a notably volatile part of our economy right now, and the stabilization of our financial banks (to the point they can lend money and take risks) is a necessary pre-condition to again growing the American economy.
2. Visa's performance also shows that consumers are making purchases. Visa is not a credit company, it is a credit-card company. In other words, it doesn't lend money, it just facilitates the lending by issuing cards to users. Visa then takes a percentage of every purchase it facilitates. Visa's earnings reflect a consumer still consuming. This is good news, as a recession is measured by gross domestic product (GDP) -- seventy percent of which is consumer spending.
The Financial Page
Despite the strong showing Visa's stock is down more than 4% in after-hour trading. After going public at 44 on March 19th, Visa (ticker: V) closed today at 75.63 and will open somewhere lower in the morning.
[Full disclosure: ACSP is a Visa shareholder. See the 'Financial Disclaimer' on the right side of the webpage.]