Increased use of debit and credit cards throughout the world pushed Visa Inc.'s fiscal fourth-quarter profit up 14 percent.
But its quarterly revenue came in shy of Wall Street expectations, in part because because the company has been cutting deals with merchants to hold onto or attract business as it tries to cope with new regulations.
The San Francisco-based company said Wednesday that it earned $880 million, or $1.27 per share, for the three months that ended Sept. 30. That compared with $774 million, or $1.06 per share, in the year-earlier period.
Revenue rose 13 percent to $2.38 billion, up from $2.12 billion last year.
After the company repurchased shares, there were 5 percent fewer outstanding, which also boosted earnings per share.
Analysts, on average, expected profit of $1.25 per share, on revenue of $2.4 billion, according to data from FactSet.
The rare revenue shortfall pushed Visa's stock down about 2 percent, or $2.20, to $90 in extended trading following the release of the earnings report. It had ended regular trading up $1.34 at $92.02.
Visa processed 13 billion transactions during the quarter, up 9 percent from last year. Card holders spent $970 trillion, with debit card use outpacing credit. That total was up 13 percent from the previous year.
The company said 65 percent of the quarter's revenue growth came from outside the United States, and revenue from abroad amounted to about 45 percent of the company's total. The growth abroad is important for Visa, which has stated a goal of generating at least 50 percent of its revenue from overseas by 2015.
"I think we're going to see them hit that target well before 2015," said Edward Jones analyst Shannon Stemm. She noted the prime areas for revenue growth were the emerging economies in Asia and Latin America, and not Europe.
Spending on Visa credit cards in the U.S. rose 15 percent to $228 billion, the seventh-straight quarter of growth after a sharp drop during the height of the recession. That increase came even as the number of outstanding accounts fell another 5 percent.
"While the growth is encouraging, much of this volume over the past year has been driven by affluent cardholders," said Chief Financial Officer Byron Pollitt. There has been no sign of higher use for the broader population, he added although Visa expects credit use to pick up as the economy improves.
Debit card use in the U.S. also continued to increase. U.S. consumers made $288 billion in purchases using debit cards, and accounts numbers continued to rise, adding 5 percent to 309 million.
CEO Joseph Saunders said there has been no sign of debit card use slackening because of the fees some banks are beginning to charge for using them.
Pollitt said it was "way too early" to comment on whether there are signs of changes in debit use related to new rules that took effect Oct. 1, which limit the fees that banks and networks like Visa can collect for processing transactions.
Also new is the option for retailers to choose which networks handle their transactions. To address the potential for lost business, Visa has been offering deals to merchants to get them to stick with or choose its system. The cost of such incentives shot up 37 percent during the quarter to $576 million.
That increase was bigger than many analysts expected, and the main reason Visa's revenue fell short of forecasts. But analyst Glenn Fodor of Morgan Stanley said Visa's aggressive deal signing with merchants "is an important dynamic," though the costs were slightly higher than even Visa forecast.
Bernstein analyst Rod Bourgeois said the increase reflects a long-term worry about Visa, because the regulations create pressure to offer deals that can drag revenue.
For the full fiscal year, Visa earned $3.65 billion, or $5.18 per share, up from $2.97 billion, or $4.03 per share, for its fiscal 2010.
The company said it continues to expect fiscal 2012 earnings-per-share growth in the mid-to-high teens range, and net revenue growth in the high single- to low double-digit range.
Wall Street is expecting earnings of $5.73 per share for next year, on revenue of $10.12 billion in revenue.
Visa also plans to keep buying its shares back. Last week, the company said its board approved another $1 billion share buyback program. For the full fiscal year, Visa spent $3.2 billion to repurchase 43 million shares at an average price of $74.94.