We expect the direct banking and payment services company
Discover Financial Services Inc.
) to beat expectations when it reports third quarter 2013 results
on Oct 21.
Why a Likely Positive Surprise?
Our proven model shows that Discover Financial is likely to beat
earnings because it has the right combination of two key
Positive Zacks ESP:
Earnings Surprise Prediction or Earnings ESP, which represents
the difference between the Most Accurate estimate and the Zacks
Consensus Estimate, is at 1.68%. This is a meaningful and leading
indicator of a likely positive earnings surprise for shares.
Zacks Rank #2 (Buy)
: Note that stocks with Zacks Ranks of #1, #2 and #3 have a
significantly higher chance of beating earnings. The sell rated
stocks (#4 and #5) should never be considered going into an
The combination of Discover Financial's Zacks Rank #2 (Buy) and
1.68% ESP makes us very confident in looking for a positive
earnings beat on Oct 21.
What is Driving the Better Than Expected
Curbing interest rates on student loans, closing the acquisition
of Home Loan Center and business expansions through alliances
with EMVCo and Paydiant are expected to aid Discover Financial's
earnings in the upcoming quarter. Also the launch of Home Equity
Loans to bridge the gap between its personal and home loans is
expected to drive better earnings in the upcoming quarter.
Discover Financial posted earnings surprise in the last two
quarter with an average beat of 11.1% aided by growth in card
sales volume. A lower share count due to share repurchase
activities also aided the upside.
Other Stocks to Consider
Discover Financial is not the only company looking up this
earnings season. We also see likely earnings beats coming from
these 3 stocks in the industry:
World Acceptance Corp
), Earnings ESP of +2.19% and Zacks Rank #1 (Strong Buy)
Capital One Financial Corp.
), Earnings ESP of +5.71% and Zacks Rank #2 (Buy)
American Express Company
), Earnings ESP of +0.82% and Zacks Rank #2 (Buy)
AMER EXPRESS CO (AXP): Free Stock Analysis
CAPITAL ONE FIN (COF): Free Stock Analysis
DISCOVER FIN SV (DFS): Free Stock Analysis
WORLD ACCEPTANC (WRLD): Free Stock Analysis
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