Filed under: Analyst reports, MasterCard Inc’A’ (MA), Morgan Stanley (MS)

Credit-card concerns Visa, Inc. (NYSE: V) and MasterCard, Inc. (NYSE: MA) will be shelling out up to $2.75 billion to settle an antitrust suit with Discover Financial Services (NYSE: DFS). Specifically, MasterCard will pay Discover $862.5 million in the fourth quarter, while Visa will fork over $1.89 billion over the course of 2009. Following the release of the settlement’s details, an analyst at Keefe, Bruyette & Woods is weighing in favorably on all three firms.

Sanjay Sakhrani called the news “a big win for Discover, as it provides an additional cushion to contend with the implications of a weaker U.S. economy.” He expects the payments will add about $1.75 to Discover’s earnings per share. However, he also cited the report as an upside catalyst for MasterCard and Visa, as it eliminates an overhang on shares of both companies — an assertion supported by analyst Julio C. Quinteros, Jr., of Goldman Sachs.

Unfortunately, though, it’s not all sunshine and rainbows in the credit-card group today. Morgan Stanley (NYSE: MS) has filed its own suit against Discover in New York State Supreme Court, alleging that it’s entitled to a chunk of the $2.75-billion settlement. DFS was spun off from Morgan Stanley last year, and the latter company claims that it should receive a portion of the award under the terms of a special dividend agreement.

Not so fast, says Discover, which alleges that its parent company is in violation of their spinoff agreement, and “the amount of Morgan Stanley’s special dividend is a matter of dispute.” Morgan fired back that “there is absolutely no basis for Discover’s claim that the agreement was breached.” Stay tuned to see how this credit-card drama plays out — in early trading, shares of all three credit card companies were higher.

Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer’s Investment Research. She is featured in the video series Schaeffer’s Daily Q&A on SchaeffersResearch.com.

Visa, MasterCard settle with Discover, but what about Morgan Stanley? originally appeared on BloggingStocks on Tue, 28 Oct 2008 11:11:00 EST. Please see our terms for use of feeds.

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