Category: DFS

DFS – Discover Financial's (DFS) Q2 Earnings Beat, Improve Y/Y

Discover Financial Services (DFS Free Report) reported second-quarter 2021 adjusted earnings of $5.55 per share, beating the Zacks Consensus Estimate of $3.68 by a whopping 50.8%. The bottom line rebounded from the year-ago quarter’s loss of $1.20 per share. Results were driven by marketing investments, growing sales trends and a solid credit performance.

This upside can also be attributed to strength in its Digital Banking and Payment Services businesses.

Operational Update

In the reported quarter, the company’s revenues — net of interest expenses — rose 34% year over year to $3.5 billion.

The top line beat the Zacks Consensus Estimate by 24.7% on the back of its Direct Banking business.

Interest expenses of $290 million decreased 39.8% year over year.

Total operating expenses increased 13.5% to $1.2 billion due to higher employee compensation and benefits, marketing and business development, and other expense.

Segmental Update

Digital Banking Segment

This segment’s pre-tax income came in at $1.5 billion against the year-ago quarter’s loss of $484 million. This is attributable to a decline in provision for credit losses and higher revenue net of interest expenses. However, the same was partly offset by higher operating expenses.

Total loans dipped 1% year over year to $87.7 billion. Credit card loans fell 2% to $68.9 billion.

Personal loans were down 6% while private student loans inched 1%, both on a year-over-year basis. Net interest income increased 5% year over year owing to a favourable impact from lower market rates and lower interest charge-offs.

Net interest margin was 10.68%, up 87 basis points from the year-ago quarter’s level.

Payment Services Segment

Pre-tax income was $692 million in the quarter under review, up from the year-earlier period’s figure of $29 million.

Payment Services volume was 22% above the prior-year period’s number.

PULSE dollar volume expanded 19% year over year, aided by growth in all debit products, led by an increased spend from the economic recovery.

Diners Club volume expanded 41% from the year-earlier quarter’s tally following the COVID-19 impact.

Network Partners volume rose 30%, backed by AribaPay.

Strong Financial Position

Discover Financial’s total assets were worth $110.9 billion as of Jun 30, 2021, down 2.5% year over year.

Total liabilities as of Jun 30, 2021 were $97.8 billion, down 6.1% year over year.

Total equity was $13.1 billion on Jun 30, 2021, up 36.6% year over year.

Share Repurchase and Dividend Update

In the second quarter, the company bought back shares worth $553 million. Shares of common stock outstanding dipped 1.6% from the previous quarter’s reading.

Management declared a new $2.4-billion share buyback plan. It also hiked the divided by 14% to 50 cents. The latest share repurchase planspans three quarters through Mar 31, 2022.

The company’s board of directors approved a quarterly cash dividend of 50 cents per share payable Sep 2, 2021 to its shareholders of record on Aug 19, 2021.

Zacks Rank

Discover Financial has a Zacks Rank #3 (Hold), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases from Finance Sector

Here are a few companies worth considering from the finance sector as our model shows that these have the right combination of elements to beat on earnings this reporting cycle:

PJT Partners Inc. (PJT Free Report) has an Earnings ESP of +2.13% and a Zacks Rank #2, currently. You can uncover the best stocks to buy or sell before they’re reported with our  Earnings ESP Filter.

Moodys Corp. (MCO Free Report) has an Earnings ESP of +2.44% and a Zacks Rank of 3 at present.

Principal Financial Group, Inc. (PFG Free Report) has an Earnings ESP of +0.05% and is currently Zacks #3 Ranked.

DFS – Discover (DFS) Surpasses Q2 Earnings and Revenue Estimates

Discover (DFS Free Report) came out with quarterly earnings of $5.55 per share, beating the Zacks Consensus Estimate of $3.68 per share. This compares to loss of $1.20 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 50.82%. A quarter ago, it was expected that this credit card issuer and lender would post earnings of $2.88 per share when it actually produced earnings of $5.04, delivering a surprise of 75%.

Over the last four quarters, the company has surpassed consensus EPS estimates four times.

Discover, which belongs to the Zacks Financial – Consumer Loans industry, posted revenues of $3.58 billion for the quarter ended June 2021, surpassing the Zacks Consensus Estimate by 24.73%. This compares to year-ago revenues of $2.66 billion. The company has topped consensus revenue estimates four times over the last four quarters.

The sustainability of the stock’s immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management’s commentary on the earnings call.

Discover shares have added about 34% since the beginning of the year versus the S&P 500’s gain of 15.1%.

What’s Next for Discover?

While Discover has outperformed the market so far this year, the question that comes to investors’ minds is: what’s next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company’s earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Discover was mixed. While the magnitude and direction of estimate revisions could change following the company’s just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $3 on $2.89 billion in revenues for the coming quarter and $13.95 on $11.63 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Financial – Consumer Loans is currently in the top 22% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

DFS – Why Discover Financial (DFS) Might Surprise This Earnings Season

Investors are always looking for stocks that are poised to beat at earnings season and Discover Financial Services (DFS Free Report) may be one such company. The firm has earnings coming up pretty soon, and events are shaping up quite nicely for their report.

That is because Discover Financial is seeing favorable earnings estimate revision activity as of late, which is generally a precursor to an earnings beat. After all, analysts raising estimates right before earnings — with the most up-to-date information possible — is a pretty good indicator of some favorable trends underneath the surface for DFS in this report.

In fact, the Most Accurate Estimate for the current quarter is currently at $3.87 per share for DFS, compared to a broader Zacks Consensus Estimate of $3.58 per share. This suggests that analysts have very recently bumped up their estimates for DFS, giving the stock a Zacks Earnings ESP of +8.12% heading into earnings season.

Why is this Important?

A positive reading for the Zacks Earnings ESP has proven to be very powerful in producing both positive surprises, and outperforming the market. Our recent 10-year backtest shows that stocks that have a positive Earnings ESP and a Zacks Rank #3 (Hold) or better show a positive surprise nearly 70% of the time, and have returned over 28% on average in annual returns (see more Top Earnings ESP stocks here).

Given that DFS has a Zacks Rank #3 and an ESP in positive territory, investors might want to consider this stock ahead of earnings. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Clearly, recent earnings estimate revisions suggest that good things are ahead for Discover Financial, and that a beat might be in the cards for the upcoming report.

DFS – Discover Financial (DFS) Ties Up to Boost Global Acceptance

Discover Financial Services (DFS Free Report) inked a deal with SIBS MB to enhance the global acceptance for both companies. With this agreement, Discover, Diners Club International and network alliance cardholders will now be able to use their cards on the SIBS MB network at merchant and ATM points in Portugal.

SIBS MB, headquartered in Lisbon, PT, is the SIBS Group company that allows transactions on above 23.7 million bank cards including cash withdrawals and electronic purchases at the ATM and POS of the MB Network.

The tie-up will even enable members of SIBS MB to issue MB cards, which can be used on the Discover Global Network for global purchases and cash withdrawals outside Portugal. It also offers access to more than 50 million outlets in 200 countries and territories through the Discover Global Network.

This apart, the collaboration aligns with SIBS MB’s aim to increase the number of payment options for members and reinforces its efforts to serve customers more efficiently. Tourists can now enjoy seamless shopping experience in Portugal.

Discover Financial constantly forges strategic alliances to expand its global reach and boost its portfolio. It has relationships with strong regional payments networks, such as the aforementioned SIBS MB and provides them with the required scale.

The company constantly works on integrating choices on a wider scale for its customers to enhance their experience.

In May, this financial consumer loans provider entered into an agreement with Eazy Financial Services to bolster acceptance for the cardholders of both companies. With this pact, Discover, Diners Club International and network alliance cardholders will be able to use their card at 95% of point-of-sale merchants and 100% of ATMs in Bahrain. Customers will be able to use the Discover Global Network for completing transactions via more than 50 million merchants in 200 plus countries and territories.

It also signed a new network contract with market-leading digital payment solutions company and fintech enabler Arab Financial Services (AFS) to drive global acceptance for both companies.

Zacks Rank and Price Performance

Shares of this presently Zacks Rank #3 (Hold) company have soared a whopping 163.6% in a year’s time compared with the industry’s rally of 128%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment Research
Image Source: Zacks Investment Research

Stocks to Consider

Some better-ranked stocks in the same space are Credit Acceptance Corporation (CACC Free Report) , Ally Financial Inc. (ALLY Free Report) and First Cash, Inc. (FCFS Free Report) , each carrying a Zacks Rank #2 (Buy) at present.

Credit Acceptance, Ally Financial and First Cash managed to deliver a trailing four-quarter surprise of 51.82%, 110.5% and 19.84%, respectively, on average.

DFS – Discover and SIBS MB Establish Strategic Agreement to Increase Payment Acceptance

LISBON, Portugal & RIVERWOODS, Ill.–()–SIBS MB and Discover signed a strategic agreement that increases the global acceptance footprint for both organizations. This new strategic agreement gives Discover, Diners Club International and network alliance cardholders the ability to use their cards on the SIBS MB network at merchant and ATM locations across Portugal.

The agreement will also allow members of SIBS MB to issue MB cards that will be accepted on the Discover Global Network for international purchases and cash withdrawals outside Portugal and provides access to more than 50 million outlets in 200 countries and territories via the Discover Global Network. This agreement enhances SIBS MB’s strategy to grow the number of payment options available to its members, and provides more choices to consumers on how they want to pay.

SIBS MB Chief Executive Officer, Ana Grade said: “This strategic partnership with Discover reinforces SIBS’ continuous efforts to offer multiple payment options on a global scale. We believe that this new alliance with the Discover Global Network will grant tourists a compelling shopping experience in our country, while introducing new options and increasing the choices for banks and MB cardholders. This strategic partnership focuses on acquiring to allow all Discover Global Network cards to be accepted through the MB network, and on allowing SIBS MB issuers to issue MB cards that will be accepted on the Discover Global Network for international purchases and withdrawals outside of Portugal.”

“Through alliances with strong regional payments networks such as SIBS MB, Discover is able to provide our partners with the global reach, technical solutions, scale and the independence that they value,” said Matt Sloan, vice president of international markets at Discover. “We have many existing partners with cardholders that regularly spend in Portugal who will benefit from the dramatic increase in acceptance.”

About SIBS MB

SIBS MB, is the SIBS Group company that manages the MB brand, which allows more than 23.7 million bank cards to make cash withdrawals and electronic purchases at the ATM and POS of the MB Network, in a safe and convenient way, with the payment authorization in real time.

About Discover

Discover Financial Services (NYSE: DFS) is a digital banking and payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company issues the Discover card, America’s cash rewards pioneer, and offers private student loans, personal loans, home loans, checking and savings accounts and certificates of deposit through its banking business. It operates the Discover Global Network comprised of Discover Network, with millions of merchant and cash access locations; PULSE, one of the nation’s leading ATM/debit networks; and Diners Club International, a global payments network with acceptance around the world. For more information, visit www.discover.com/company.

DFS – Discover and Eazy Sign Agreement to Grow Acceptance for Cardholders

BAHRAIN & RIVERWOODS, Ill.–()–Discover, a leading digital bank and payments company, and Eazy Financial Services signed an agreement to expand acceptance for both company’s cardholders. Discover, Diners Club International and network alliance cardholders will now be able to use their card at 95% of point-of-sale merchants and 100% of ATMs in Bahrain. Once Eazy Financial begins issuing its first national cards, its customers will get access to the Discover Global Network and be able to make transactions at more than 50 million merchants in more than 200 countries and territories.

This partnership is Discover’s second network alliance signed in the past year in Bahrain and will grow acceptance to almost 100% for Discover Global Network cardholders transacting in the country. It is also the sixth alliance agreement Discover has signed in the Middle East and North Africa region.

“Continually growing acceptance in this area will benefit all of the cardholders of our regional partners,” said Matt Sloan, vice president of international markets at Discover. “Eazy Financial has a strong footprint in the country and working together will provide its cardholders a strong card product.”

“This partnership with Discover empowers Eazy with the quickest, most effective way to re-engineer its business strategies,” said Nayef Tawfeeq Al Alawi, Founder & MD, CEO of Eazy Financial Services. “Discover shall provide Eazy with significant customer acquisition opportunities, and serve as an important brand investment for Eazy and its customers, serving them with trustable, secured and unified Global Card Acceptance.”

Discover Global Network has more than 50 million merchant acceptance locations and 2 million ATM and cash access locations around the world. The Discover Global Network includes Discover Network, Diners Club International, PULSE and more than 20 alliance partner networks across the globe.

About Discover

Discover Financial Services (NYSE: DFS) is a digital banking and payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company issues the Discover card, America’s cash rewards pioneer, and offers private student loans, personal loans, home loans, checking and savings accounts and certificates of deposit through its banking business. It operates the Discover Global Network comprised of Discover Network, with millions of merchant and cash access locations; PULSE, one of the nation’s leading ATM/debit networks; and Diners Club International, a global payments network with acceptance around the world. For more information, visit www.discover.com/company

About Eazy

Established in 2016, Eazy is licensed & regulated by the Central Bank of Bahrain as an Ancillary Services Provider, Payment Services Provider, Biometric Payment Services, Payment Gateway, Financial Settlement/Clearing House, Card programs/Scheme and The 4th POS & Online Payment Acquirer in The Kingdom of Bahrain. Eazy’s 1st product was the “Biometric Payment Network” Inaugurated back in 2019 by The Late HRH Prince Khalifa bin Salman Al Khalifa the Prime Minster of the Kingdom of Bahrain being the “First Bahraini enrolling and transacting using his Fingerprint. Eazy is Primarily engaged in digital financial services within the Financial Industry such as “Digital Wallet” allowing customers based in Bahrain and other countries to obtain Eazy’s Wallet Account & Eazy’s own National Virtual & Physical Branded Cards, in addition to numerous added value services to their wallet & cardholders such as Biometric Facial payments and more, by achieving its main goal towards transacting seamlessly, adopting innovative new trends & latest payment industry solutions that will evolve to the next level of customer experience.

DFS – Discover (DFS) Down 4.2% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Discover (DFS Free Report) . Shares have lost about 4.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Discover due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Discover Financial Q4 Earnings Surpass, Improve Y/Y

Discover Financial reported fourth-quarter 2020 adjusted earnings of $2.59 per share, beating the Zacks Consensus Estimate of $2.37 by 9.3%.
Moreover, the bottom line improved 15% year over year owing to a solid performance by its Direct Banking business. The company witnessed strong growth in its digital banking model.

Operational Update

In the reported quarter, the company’s revenues — net of interest expenses — dropped 4% year over year to $2.8 billion due to lower other income.
However, the top line beat the Zacks Consensus Estimate by 0.1%.

Total loans declined 6% year over year to $90.4 billion.

Interest expenses of $383 million decreased 37.7% year over year.

Total operating expenses increased 8% to $1.3 billion due to higher one-time expense items and rise in compensation. However, the same was partly offset by decreased marketing and professional fees.

Segmental Update

Direct Banking Segment

This segment’s pre-tax income came in at $991 million, up 12.2% year over year owing to a decrease in the provision for credit losses. This was partly offset by lower revenue, net ofinterest expense as well as increased operating costs.

Total loans dipped 6% year over year to $90.4 billion. Credit card loans fell 7% to $71.5 billion.

Personal loans were down 7% while private student loans inched up 3%, both on a year-over-year basis. Net interest income slipped 2% year over year due to lower average receivables and an unfavorable net impact from lower market rates.

Net interest margin was 10.63%, up 34 basis points from the year-ago quarter.

Payment Services Segment

Payment Services pre-tax income was $24 million in the quarter under review, down 41.5% from the year-earlier period due to lower Diners Club and Network Partners revenues.

Payment Services volume was up 6% from the prior-year period.

PULSE dollar volume expanded 10% year over year, fuelled by higher average spend per transaction related to the pandemic.

Diners Club volume contracted 28% from the year-earlier quarter due to the COVID-19 impact.

Network Partners volume expanded 23%, backed by AribaPay.

Strong Financial Position

Discover Financial’s total assets were worth $112.9 billion as of Dec 31, 2020, down 1% year over year.

Total liabilities as of Dec 31, 2020 were $102 billion, flat year over year.
Total equity was $10.8 billion on Dec 31, 2020, down 8.2% year over year.

Share Repurchase Update

The board of directors recently approved a new $1.1-billion share repurchase program, which can be terminated at any time. The new plan expires Dec 31, 2021.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 15.76% due to these changes.

VGM Scores

Currently, Discover has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren’t focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Discover has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

DFS – DFS Stock Price: $115 Target (Up From $110) By RBC

  • Shares of Discover Financial Services (NYSE: DFS) have received a price target increase from $110 to $115 by RBC Capital. These are the details.

Shares of Discover Financial Services (NYSE: DFS) have received a price target increase from $110 to $115 by RBC Capital. And RBC Capital analyst Jon Arfstrom is maintaining an “Outperform” rating on the shares.

Arfstrom noted that Discover’s fourth quarter earnings beat estimates and the company is moving in the right direction. Management is also focused on loan loss provisions, which is also a key driver for the company.

Arfstrom pointed out that Discover saw positive trends in the quarter and the provision declined again. Credit card balances and volumes also saw growth in the quarter.

Discover Financial Services (NYSE: DFS) had reported net income of $799 million (2.59 per diluted share) for the fourth quarter of 2020 compared to net income of $708 million ($2.25 per diluted share) for the fourth quarter of 2019.

“The challenges the nation and our company faced in 2020 were unprecedented, and I am extremely proud of our efforts to protect our employees, support our customers and strengthen the Discover franchise,” said Roger Hochschild, CEO and President of Discover. “While there is still uncertainty in the U.S. economy, the strength of our digital banking business model and the benefits of our investment in core capabilities have positioned us well heading into 2021.”

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.

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