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Visa Net Rises 21%, Again Surpassing MasterCard Growth

MasterCard (MA) on Wednesday reported slowing earnings growth but still beat Wall Street views, while Visa growth topped forecasts — and its smaller rival's pace — after the closing bell.

MasterCard said third-quarter profit rose 10% to $6.17 a share, beating views by 24 cents. But some of the gain came from a lower tax rate. Revenue rose 5% to $1.9 billion. Analysts had expected a 7% bump.

But those results and a generally upbeat outlook were enough for shares to rise nearly 2%.

"We thought (the stock) would have been down," said Robert W. Baird analyst David Koning. "But expectations were already low heading into the quarter. Given that the overall results were reasonably OK and October turned out pretty good, investors were left feeling a little better.

Still, it was MasterCard's fourth straight quarter of decelerating growth in profit and revenue.

Meanwhile Visa (NYSE:V) after the market closed said earnings jumped 21% over the year earlier to $1.54 a share, 4 cents above analysts' estimate. Revenue rose 15% to $2.7 billion, slightly above views.

New Growth Leader

It was the second straight quarter that Visa profit and revenue gains outpaced that of its rival MasterCard, which previously had been the pacesetter. The card giant also authorized a new $1.5 billion share buyback program.

Shares, which rose fractionally during the regular session, grew nearly 2% in after-hours trading.

Visa expects 2013 revenue growth in the "low double digits," but it could be higher if the global economy sees a stronger-than-expected rebound. EPS growth next year is still seen in the "high teens.

In a morning conference call, MasterCard said cross-border volumes in October grew 3 percentage points above the 14% growth in Q3, driven mostly by Europe. Process volume growth outside the U.S., including Europe, also has picked up a bit.

But transaction growth in October was down to 22% from Q3's 24%, due to the lapping of PIN-debit wins in the U.S. and Netherlands last year.

Growing Debit

The credit card giants have been in a big battle over debit transactions. New U.S. regulations related to Dodd-Frank's Durbin amendment gave MasterCard opportunity to grab debit card share from Visa. But "most of the big shift has played out," Koning sa id.

MasterCard's U.S. debit card volume growth slowed in Q3 but still grew 13% to $110 billion.

Visa's U.S. debit volume fell 6.6% in Q3 to $363 billion, but that decline was less than in recent quarters and will likely be the low point.

Saunders Steps Away

"We are getting smarter about how to operate in the new (Dodd-Frank) environment," CEO Joseph Saunders said in the call.

On Thursday, former JPMorgan exec Charles Scharf steps in as Visa chief executive. Saunders will remain chairman until his retirement on March 31.

Visa has been stepping up incentives so merchants will direct volume its way.

But MasterCard is not seeing "any appreciable impact" from Visa's pricing strategies, says Keefe, Bruyette & Woods analyst Sanjay Sakhrani.

"Visa's pricing strategy is apparently affecting regional PIN-debit players more than MasterCard, which seems to be retaining if not continuing to grow its U.S. PIN-debit share," he said.