On Feb 18, 2014,
Discover Financial Services
) reached a new 52-week high of $57.63 after delivering a solid
fourth-quarter 2013 earnings results, which included a 5.13%
posting positive earnings surprise. With respect to earnings
trend, this financial service providing company witnessed
positive earnings surprises in three of the last four quarters,
with an average beat of 9.11%.
During fourth-quarter 2013, Discover Financial's top line rose 6%
to $2.1 billion on a year-over-year basis and also surpassed the
Zacks Consensus Estimate by 20.7%. The upside was driven by loan
growth and higher net interest margin in the Direct Banking
segment as well as higher card sales.
Discover Financial witnessed an improvement in card sales volume
during the quarter buoyed by higher wallet share with the
prevailing customers as well as by receiving new accounts.
Moreover, the loan portfolio of the company remained quite
strong. Increase in credit card loans, private student loans and
personal loans boosted the overall loan growth. Also, there was
an improvement in charge-off rate and provision for losses,
reflecting higher recovery.
Increase in assets, shareholders' equity and book value
strengthened the company's balance sheet. Discover Financial also
maintained its steady capital deployment strategy through share
repurchases and dividend payout.
The Zacks Consensus Estimate for 2014 and 2015 moved up riding on
the strength of solid earnings results. While it increased 1.4%
to $5.16 for 2014 over the last 30 days, it moved up 1.3% to
$5.47 for 2015. The estimates translate to a year-over-year
improvement of 4.03% and 6%, respectively.
Going forward, the launch of products like Cashback, home equity
installment loans and the initiation of the FICO scores on the
"Discover it" cards are expected to help Discover Financial
generate more revenues, making way for long-term growth.
The overall long-term earnings growth rate for this stock is
projected at 10.7%. The stock gained almost 50% in the 1-year
Discover Financial currently carries a Zacks Rank #2 (Buy). Some
better-ranked stocks in the financial services space include
World Acceptance Corp.
Fortress Investment Group LLC
). While Fortress Investment and Lazard sport a Zacks Rank #1
(Strong Buy), World Acceptance carries the same Zacks Rank as
DISCOVER FIN SV (DFS): Free Stock Analysis
FORTRESS INVEST (FIG): Free Stock Analysis
LAZARD LTD (LAZ): Free Stock Analysis Report
WORLD ACCEPTANC (WRLD): Free Stock Analysis
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