Visa ( V) shares were falling nearly 1.9% in late-day trading, after the credit card network posted a big loss for its fourth fiscal quarter. The San Francisco-based firm recorded a loss of $356 million, or 45 cents a share, for the three months ending Sept. 30. In the year earlier quarter, before it went public, the company posted a pro forma loss of $1.6 billion, or 96 cents a share. The loss was based on $1.1 billion of litigation reserves the company had set aside as part of its initial public offering in March. The settlement pertains to an ongoing lawsuit between Visa, MasterCard ( MA) and Discover Financial Services ( DFS). Discover and American Express ( AXP), which had previously settled with Visa and MasterCard, alleged the two companies had conspired to keep them from entering the bank-issued credit card space. Discover said late Monday that a settlement had been reached. Visa will pay a majority of the $2.75 billion, while MasterCard will pay $856 million of the settlement. MasterCard said on Monday it plans to take a charge of $515.5 million as part of its third-quarter results. Excluding litigation reserves and restructuring charges, among other things, Visa beat analysts' estimates. The firm's net income for the final quarter of its fiscal year was $448 million, or 58 cents a share. Net operating revenue was $1.7 billion for the quarter fueled by "service fees, data processing fees and international transaction fees." Analysts had pegged Visa would make 56 cents a share on $1.68 billion of revenue, according to Thomson Reuters. Analysts' estimates generally exclude special items.
"Despite increasing economic turbulence worldwide, Visa posted strong revenue and earnings gains while diligently taking steps to capitalize on the continuing secular trend toward electronic payments," CEO Joe Saunders said. "Although no company is immune to the challenges of this economic environment, we believe Visa's network business model, the continuing secular shift to electronic payments and diversity across both products and geographies offer a degree of resilience to our organization." For the full year, Visa made $804 million, or 96 cents a share, including litigation reserves totaling $1.4 billion. The company said card payments volume -- one of the company's key performance measures, along with transactions -- in the quarter rose 15% to $699 billion, compared to a year earlier. Total payment transactions rose 14% to 11.5 billion. Visa said that revenue growth may be "somewhat challenged" through 2010, given the unstable economic environment in the U.S. and abroad. The company now expects annual net revenue growth to be closer to the "lower end" of its 11% to 15% range -- slightly lower than its guidance last quarter. It reiterated that it expects annual earnings growth of 20% or more and said that it expects operating margin to range in the mid-to-high 40% range. Despite challenges the card company faces, it still expects to post double-digit earnings growth annually. Analysts have been fairly bullish on MasterCard and Visa, even within a souring economic environment. "We remain intensely focused on helping our financial institution and retail clients through this difficult period, providing them with products and services that build deeper cardholder relationships and boost their own bottom line," Saunders added.
MasterCard is set to report financial results Nov. 3.