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Shares fall as Visa quarterly results rise

Visa Inc posted quarterly results that beat analysts' expectations, but the company's shares fell in after-market trading amid investor concern about how the economy would affect results.

Many economists say the United States is in a recession, and executives at the world's largest credit card network said the economy could weigh on its results in the quarter ending September 30, even if it does not seem to be affecting payment volumes so far.

The potential for slowing growth combined with a revenue forecast below some analysts' estimates were enough to drag Visa's recently listed shares down more than 5% in extended trade.

With the stock up about 72% since its March initial offering and trading at about twice the price-to-earnings valuation of the broader market, investors were not ready for any clouds in the company's outlook.

“The market was expecting more than Visa could possibly deliver,” said Gordon Marchand, portfolio manager at Sustainable Growth Advisers in Stamford, Connecticut, which does not own Visa shares.

Net income for its fiscal second quarter ended March 31 was $314 million, or 39 cents per class A share, compared with pro forma results of $246 million in the same quarter last year.

Excluding items such as litigation and restructuring, Visa earned 52 cents per class A share, surpassing analysts' average estimate of 44 cents a share.

San Francisco-based Visa went public to give it more money to cover legal settlements and to give its bank owners a chance to replenish their coffers amid the subprime mortgage crisis.

Visa said it expects annual net revenue growth of 11% to 15%, compared with some analyst estimates for 17% growth or more.

Payments volume for the quarter ended December 31, the most recent for which information is available, grew 19% over the prior year to $681 billion. As of December 31, Visa had about 1.6 billion cards outstanding globally, up about 6% from the quarter ended September 30.

Operating revenues fell during the March quarter, to $349 million from a pro forma $394 million in the same quarter in 2007, hurt by higher advertising and marketing expenses and more money being set aside for litigation. Operating revenue rose to $1.45 billion from a pro forma $1.19 billion.

In after-market trading, Visa traded at $71.10, down 6% from Monday's close of $75.63.

MasterCard Inc's shares also fell after the market close. The second-largest credit card network globally plans to report earnings on Tuesday before US stock markets open.

Before earnings were released on Monday, Visa's shares closed at about 30 times their expected earnings for the 2009 calendar year, about twice the broader market. (Reuters)