Visa Inc., which is up over 30 percent since the start of 2013, released its earnings for the fourth quarter of their fiscal year Oct. 30. Visa released earnings per share of $1.85, which was exactly what analysts were expecting.
However, for a company that has beaten Wall Street expectations for every other quarter this year, merely meeting expectations was not received positively. During Visa’s earnings call, Visa also announced its expectations for future revenue. However, these expectations are not as strong as they were earlier this year. Given the fact that Visa is up more than 30 percent since the start of this year, weaker expectations for future revenue can negatively impact investor confidence.
Despite earnings not being as strong as investors had hoped, Visa has recently decided to increase its quarterly dividend. Along with an increased dividend, Visa also announced that it will begin the repurchase of $5 billion of its own stock. By doing this, Visa will be decreasing the supply of its stock, which will ultimately raise the price per share. Also, by repurchasing its own stock, Visa is telling investors that it believes its stock is undervalued.
With the holiday season fast approaching, consumer confidence will be pertinent to Visa’s short-term performance. Consumer confidence declined in October. One reason was the recent government shutdown. Since there is a positive correlation between consumer confidence and personal consumption, if consumer confidence can rebound, Visa will greatly benefit. Home prices have recently been rising in the U.S. If home prices are rising, demand for homes must be increasing. This shows consumers are optimistic about the future and about the state of their current jobs, which may be a sign that consumer confidence is about to increase. If the U.S. housing market is any indication of consumer confidence, Visa may be likely to see an increase in its stock price in the coming months.
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