Nov. 4 (Bloomberg) -- MasterCard Inc., the world's second- biggest credit-card company, rose 18 percent in New York trading after beating analysts' profit estimates on overseas revenue and pledging that expenses won't increase next year.

Profit excluding a $515.5 million charge to settle a lawsuit with Discover Financial Services was $322 million, or $2.47 a share, Purchase, New York-based MasterCard said yesterday, exceeding by 23 cents the average estimate of 21 analysts surveyed by Bloomberg. MasterCard surged $26.35 to $170.24 at 4:15 p.m. in New York Stock Exchange composite trading. Visa Inc., the biggest credit-card firm, rose 14 percent.

The settlement frees MasterCard to focus on expanding credit and debit-card revenue, a task made harder by the economic slowdown. The network said yesterday it will miss 2009 revenue targets and that hiring was frozen to control costs. MasterCard lost more than half its market value since reaching $320 a share in June on concern the U.S. slump is spreading to overseas markets, which contribute about half of its revenue.

``MasterCard showed that they get it -- they can't control revenue, but they can control their costs and they're moving aggressively to be as lean as possible,'' said Andrew Miedler, an analyst at Edward Jones with a ``buy'' rating on the firm, in an interview.

The company said in May it expects revenue to rise 12 percent to 15 percent annually for the next three years starting in 2009. MasterCard will probably miss that target next year, Chief Executive Officer Robert Selander said, and a goal of 20 percent to 30 percent net income growth is in jeopardy after factoring in the effects of a stronger U.S. dollar.

A Turn South

``Anybody would acknowledge that the global economy has taken a turn south that was further and faster than anyone had anticipated,'' Selander said yesterday in a telephone interview. ``We are trying to find ways in terms of managing expenses that will enable us to produce the 20 to 30 percent growth in net income that we indicated back in May.''

He said that because MasterCard's overseas revenue is in foreign currencies, ``to the degree the dollar is strengthening, that makes it harder for us to achieve net income growth.'' MasterCard is planning for a ``moderately bad year.''

``It is going to be very challenging in the U.S. and Western Europe throughout 2009,'' Selander said.

Including the legal charge, the net loss was $193.6 million, or $1.49 a share, compared with profit of $314.5 million, or $2.31 a share, a year earlier, MasterCard said in a statement. Revenue rose 24 percent to $1.3 billion, with the fastest growth in Latin America, Asia and Europe.

Second Loss in Row

The quarterly loss is the second in a row for MasterCard, which posted a $746.7 million shortfall in the period ending June 30 after booking a $1 billion charge on settling similar antitrust accusations from American Express Co. Discover and American Express sued MasterCard and Visa in 2004 after the U.S. Supreme Court ruled the networks violated antitrust laws.

MasterCard said Oct. 27 it took a $515.5 million third- quarter charge for paying its part, along with Visa, of Discover's $2.75 billion settlement. Riverwoods, Illinois-based Discover accused the networks of hurting its business by blocking banks from issuing Discover-branded cards.

The U.S. economy suffered its biggest decline since 2001 in the third quarter, with gross domestic product contracting at a 0.3 percent annual pace, the Commerce Department said last week. More than 700,000 Americans have lost their jobs this year.

Card Use

Overall credit and debit-card spending advanced in the recessions of 1991 and 2001 and will rise next year because plastic is steadily replacing cash and checks, Tien-tsin Huang, analyst at JPMorgan Chase & Co., said in an April research note.

Like Visa, which said last week that its adjusted net income doubled to $488 million, MasterCard sidesteps the rising customer defaults of American Express and Capital One Financial Corp. because it collects fees to shuttle payments between financial institutions, letting banks take the risk of making loans.

American Express said third-quarter profit from continuing operations dropped 23 percent to $861 million. It also announced plans to cut staff. Discover almost doubled provisions for loan losses and warned that it could set aside more this year. The lender said income from continuing operations slumped 27 percent to $178.9 million.

Capital One, the Mclean, Virginia-based credit-card lender and bank, had to add $208.6 million to loss reserves and said it expects about $7.2 billion in soured loans in the next year.

MasterCard had 36 percent of the U.S. credit and debit-card market last year, compared with San Francisco-based Visa's 51 percent and 12 percent for New York-based American Express, according to the Nilson Report, an industry newsletter based in Carpinteria, California.

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

Last Updated: November 4, 2008 16:40 EST