Visual Sciences, Inc. upgraded on lawsuit settlement

Shares of Visual Sciences, Inc. (Nasdaq: VSCN) are edging higher today after Avondale Partners upgraded the provider of web analytics to a “market outperform” rating from “market perform.” The action was based on the company’s announcement Monday that it settled a lawsuit surrounding patent infringements with NetRatings.

Under the terms of the settlement, Visual Sciences said it agreed to pay NetRatings $9.0 million, of which $2.0 million is due upon execution of the settlement and patent license agreement. The company said the remaining $7.0 million will be paid in quarterly installments of $0.5 million beginning March 31, 2008.

“[The settlement] eliminates an overhang with the stock and will mean less expense going forward,” wrote Avondale Partners analyst Sean Jackson in a research note.

According to Jackson, the litigation has cost Visual Sciences up to $1 million per quarter since it began in February of last year. The analyst said he expects the lawsuit settlement will be accounted for as a net decrease in expenses going forward (even on a GAAP basis).

On account of reduced expenses associated with the lawsuit settlement, Jackson is raising his estimates for fiscal year 2007 and 2008. For the current year, Jackson is raising his earnings estimate to $0.62 from $0.58, while he is raising his earnings estimate for 2008 to $0.84 from $0.71. Fourteen analysts surveyed by Thomson Financial were on average expecting earnings of $0.57 and $0.76 for 2007 and 2008, respectively.

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