April 29 (Bloomberg) -- Visa Inc., the world's largest credit-card network, and its chief rival MasterCard Inc. may still see higher share prices after Visa's stock fell about 7 percent yesterday when earnings disappointed some investors.

``The immediate reaction was a blip,'' Red Gillen, analyst with Boston-based financial consulting firm Celent, said in an interview. ``The onward march in the conversion of paper to plastic is going to continue. There's plenty of room for both Visa and MasterCard to grow.''

San Francisco-based Visa announced yesterday that net income climbed 28 percent to $314 million in its first earnings report since a record initial public offering last month. Shares fell as low as $70.64 after the results didn't meet the most optimistic predictions.

MasterCard, whose shares have surged more than sixfold since its 2006 IPO, reports first-quarter earnings today. The Purchase, New York-based company may say that profit excluding certain items was $1.99 a share, the average estimate of 18 analysts surveyed by Bloomberg.

Payment networks are benefiting from consumers' increasing preference for using plastic over cash and checks. Visa has advanced about 72 percent through yesterday in the six weeks since its IPO as investors clamored for the company handling the most credit and debit transactions.

Investor Expectations

``Expectations for Visa, because of the overdone run-up in the stock price, were likely beyond what Visa could have reached,'' Craig Maurer, an analyst at New York-based Calyon Securities, said in an interview. He had a ``buy'' rating on Visa as of yesterday.

Adjusted net income was 52 cents a share, Visa said in a statement, beating the 45-cent average estimate of 16 analysts surveyed by Bloomberg. The results were released after the close of regular U.S. trading.

Total operating revenue rose 22 percent to $1.45 billion. Visa expects earnings per share to grow at least 20 percent and revenue to grow 11 percent to 15 percent annually for the next three years. It also expects to produce at least $1 billion in extra cash a year.

Credit-card purchases and cash advances rose 21 percent to $1.1 trillion in the quarter ended Dec. 31, the company said. Total Visa cards in use globally rose 16 percent to 1.6 billion. The company reports these figures one quarter in arrears.

The company's IPO raised $17.9 billion on March 18, the most for a U.S. company, and the tally passed $19 billion after more shares were sold to satisfy demand. It was the world's second-largest public offering after Industrial & Commercial Bank of China Ltd.'s $22 billion debut in 2006.

Companies Transformed

The listing completed the transformation of Visa and MasterCard from not-for-profit associations owned by banks to independent companies that serve banks as customers. Visa's six biggest bank owners made at least $3.17 billion from selling part of their stakes, according to data compiled by Bloomberg.

Unlike rivals American Express Co. and Discover Financial Services, Visa and MasterCard are insulated from rising U.S. defaults because they don't make loans to cardholders. MasterCard has more than doubled in trading in the past year, while American Express dropped 23 percent and Discover 34 percent.

Consumers will use credit and debit cards for 55 percent of all U.S. transactions by 2011, rising from 40 percent in 2005, according to the Nilson Report, an industry newsletter based in Carpinteria, California.

Visa processed 60 percent of the $5.2 trillion spent on general purpose payment cards around the world in 2006, more than the 32 percent controlled by MasterCard, according to Cowen and Co. analyst Moshe Katri.

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

Last Updated: April 29, 2008 00:00 EDT