The weak global economy has prompted Sanjay Sakhrani, an analyst at KBW Inc.'s Keefe, Bruyette & Woods Inc., to lower his expectations for much of the credit card sector.

Mr. Sakhrani reduced his earnings estimates or pricing targets for all four payment networks and a major processor in a note published Thursday, citing high unemployment, weak retail sales, and rising funding costs.

The "recent financial crisis" could lead to "a more severe weakening in the global macroeconomic environment than originally anticipated," he wrote.

Visa Inc. and MasterCard Inc. are being affected by a "deceleration in global growth," and both their stocks have dropped about 40% since the end of the second quarter, Mr. Sakhrani said in an interview Thursday. (He lowered his earnings estimates and pricing targets for both networks.) But both companies are still benefitting from growth in debit payments and a global move from cash to plastic, he said.

"The networks are best positioned, because you don't have the balance-sheet risk" of issuers, he said. "We've taken them down, but the stocks have gone down more. … But given where the stocks are, there's still full-return potential."

Companies like Discover Financial Services and, especially, American Express Co. are more affected by credit quality and funding concerns, Mr. Sakhrani said. But processors, especially Heartland Payment Systems Inc. and Total System Services Inc., may be the most affected, he said.

Recent consolidation among big banking companies like JPMorgan Chase & Co. and Citigroup Inc., which do much of their processing in-house, "could provide headwinds for payment processors," he wrote.

He maintained his stock ratings on all six companies. Visa and MasterCard are rated "outperform," while Amex, Discover, Heartland, and TSYS are rated "market perform."

He raised his full-year earnings estimate for Heartland by 1 cent, to $1.14.

Mr. Sakhrani raised his earnings estimates for another processor, Global Payments Inc., which he said has "a nice mix of both U.S. and international" business.

He expressed more concerns for TSYS, whose "U.S. business is going to feel some pressure from the consolidation" of issuers.

Heartland, which does not "have any international exposure," could be particularly affected by a downturn in consumer spending, he said. "A significant portion of their volumes come from discretionary spending sources like restaurants and retailers. … That could lead to some more earnings pressure."

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