The Zacks Analyst Blog Highlights: EI DuPont de Nemours, Visa, MasterCard, Discover Financial Services and Amercian Express

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Jul 29, 2011, 09:30 ET

CHICAGO, July 29, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: EI DuPont de Nemours & Co. (NYSE: DD), Visa Inc. (NYSE: V), MasterCard Inc. (NYSE: MA), Discover Financial Services (NYSE: DFS) and Amercian Express Co. (NYSE: AXP).

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Here are highlights from Thursday's Analyst Blog:

DuPont Profits, Outlook Bright

EI DuPont de Nemours & Co. (NYSE: DD) reported an increase in profit of $1.22 billion or $1.37 per share in the second quarter of 2011 from $1.16 billion or $1.17 per share in the same quarter of 2010. The profit exceeded the Zacks Consensus Estimate by 4 cents per share.

The improvement in profit was attributable to higher selling prices, increased sales volume and currency benefit, partly offset by higher raw material, energy, and freight costs.

Sales in the quarter grew 19% to $10.3 billion, up from the Zacks Consensus Estimate of $9.95 billion. The increase in sales reflected a rise of 2% in sales volume, an increase of 11% in local price, 3% currency benefit and 3% net increase from portfolio changes. Sales in the developing markets rose 29%.

Outlook

DuPont upgraded its full-year 2011 earnings outlook to $3.90–$4.05 per share from its previous forecast of $3.65–$3.85 per share. This revision was attributable to the company's strong earnings results, the expectation for continued global economic growth and about $.05 per share full-year operating earnings from Danisco on an underlying basis.

The company's estimate for the impact of the Danisco acquisition on full-year reported earnings is at present a reduction of $.18 to $.29 per share, versus the previous estimate of $.30 to $.45 per share. The current view is based on anticipated full-year Danisco operating earnings of about $.05 per share and significant item charges related to the acquisition estimated to be $.23 to $.34 per share. In addition to these Danisco charges, the company expects a $.03 per share significant item charge in the third quarter associated with a licensing agreement.

DuPont is a global chemical and life sciences company, employing more than 60,000 people worldwide with a diverse array of product offerings. With over 21,000 patents and 15,000 patent applications worldwide, DuPont sells its products in diverse markets, such as transportation, construction, apparel, agriculture, nutrition and health, packaging and electronics markets.

Visa: Steady & Impressive

Visa Inc.'s (NYSE: V) fiscal third quarter 2011 (ended June 30, 2011) operating earnings of $1.26 per Class A common share were three pennies ahead of the Zacks Consensus Estimate of $1.23. Results also substantially exceeded 96 cents reported in the year-ago quarter on lower share count.

Visa's GAAP net income for the quarter crossed $1.0 billion, surging 41.4% from $716 million in the year-ago quarter. During the reported quarter, Visa also divested 10% of its stake in Visa Vale issuer Companhia Brasileira de Solucoes e Servicos (CBSS) to Banco do Brasil and Bradesco. This resulted in a net after-tax investment gain of $44 million.

Additionally, excluding the non-operating gain related to revaluation of Visa Europe put option, operating net income escalated 23% year over year to $883 million. Besides, operating income climbed 18.3% year over year to $1.35 billion. Meanwhile, total GAAP operating expenses rose 9.5% year over year to $977 million, whereas the effective tax rate was 38% in the reported quarter.

Alongside, total operating revenues for the reported quarter were $2.32 billion, up 14.4% from $2.03 billion in the year-ago quarter and marginally higher than the Zacks Consensus Estimate of $2.295 billion. While growth was driven by strong performance across segments, currency fluctuations contributed a positive 2% to the top line.

Service revenues increased 20.8% year over year to $1.06 billion and are recognized based on payments volume in the prior quarter. All other revenue categories are recognized based on current quarter activity. Data processing revenues grew 11.9% over the prior-year period to $886 million.

Besides, International transaction revenues, which are driven by cross-border payments volume, climbed 15.3% over the prior-year quarter to $662 million. However, other revenues, earned through Visa Europe's licensing fee, were $167 million, declining 8.7% over the year-ago quarter. Client incentives, which are a contra-revenue item, were $448 million, representing 16% of gross revenues.

On a constant dollar basis, payments volume increased 13% year over year to $941 billion. Total processed transactions carrying the Visa brand increased 11% year over year to 13.0 billion. Cross border volume, on a constant dollar basis, grew 14% year over year.

As of June 30, 2011, cash and equivalents, restricted cash and available-for-sale investment securities totaled $6.7 billion, up from $5.6 billion as of September 30, 2010, including $3.0 billion of restricted cash for litigation escrow. Long-term debt reduced to $22 billion from $32 billion at the end of September 2010.

Total shareholders' equity was recorded at $26.1 billion, up from $25.0 billion as of September 30, 2010. Besides, Visa's operating cash flow jumped to $3.0 billion from $1.8 million as of June 30, 2010.

Share Repurchase Update

Besides, during the reported quarter, Visa also repurchased about 13.7 million shares at an average price of $77.36, for a total of $1.1 billion. The share repurchases were made under the previously announced $1.0 billion share repurchase plan announced in October 2010 and May 2011.

Accordingly, the board of Visa also sanctioned a new $1 billion class A share repurchase program, which is expected to expire on July 20, 2012.

Guidance

Visa reiterated its projections for fiscal 2011, anticipating annual net revenue growth in the range of 11%-15%; annual operating margin of about 60% and GAAP tax rate of 36.5%-37.0%. However, capital expenditure is now expected to be above $300 million from the prior estimate of $250-$275 million.

Further, the company re-affirmed its client incentives within the range of 16.0%-16.5% of gross revenue; advertising, marketing and promotional expenses at less than $900 million; annual earnings per share growth at over 20% and annual free cash flow in excess of $3 billion in fiscal 2011.

Earlier this month, Visa also provided its financial outlook for fiscal 2012, whereby annual net revenue growth is expected to be in the high single-digit to low double-digits range. Besides, annual earnings per share growth are anticipated in the middle-to-high teens. The trimmed guidance is the result of the recently imposed debit-fee rule.

Dividend Update

On July 22, 2011, the board of Visa declared a quarterly dividend of 15 cents per share of class A common stock payable on September 7, 2011, to the company's Class A, Class B and Class C common shareholders of record as on August 19, 2011.

Business Update

On July 19, 2011, Visa announced that the company along with MasterCard Inc. (NYSE: MA), Discover Financial Services (NYSE: DFS) and Amercian Express Co. (NYSE: AXP) have joined hands with Isis, leading mobile platform in the U.S., to initiate mobile commerce in the U.S.

On June 9, 2011, Visa acquired Fundamo, a South-Africa based leading software maker for mobile banking services in more than 40 countries, in an all cash deal of $110 million. The transaction is expected to be marginally dilutive to the company's fiscal 2011 earnings. With more than 5.0 million registered subscribers, Fundamo has a strong capacity to reach out to more than 180 million consumers over the long run, thereby amplifying Visa's growth prospects in the rapidly developing and emerging mobile banking business.

Concurrently, Visa also announced a long-term trade alliance with a U.K. mobile software maker Monitise plc to enhance the delivery of mobile financial services to Visa account holders through banks. Additionally, both Monitise and Visa are also planning to launch a mobile banking solution in the U.S. for clients of Visa DPS, Visa's debit and prepaid processing platform.

Our Take

Visa continues to drive growth through increased payment volumes along with consistent growth in processed transactions. The company benefits from strong secular demand growth, meaningful international exposure, high barriers to entry, excellent pricing power and impressive operating leverage.

Although regulatory compliances as a result of the ongoing financial overhaul in the U.S. and litigation are expected to weigh on the financials of the company in fiscal 2012, Visa aims to retain its strength by exploring newer growth avenues that include mobile, eCommerce and money transfer services. The company is also generating strong cash flow and maintains a healthy capital position.

Meanwhile, Visa's prime peer, MasterCard is scheduled to release its earnings results before the market opens on August 3, 2011.

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