Zacks Investment Research upgraded
Discover Financial Services
) to a Zacks Rank #2 (Buy) on Jan 25, 2014.
Why the Upgrade?
Discover Financial witnessed upward estimate on the back of solid
fourth -quarter 2013 results. Impressive earnings resulted in the
Zacks Consensus Estimate for full-year 2014 to rise 1% to $5.12
per share, which translates into a year-over-year growth of 3.2%.
Post-earnings, the Zacks Consensus Estimate for full-year 2015
also increased nearly 1% to $5.45 per share (representing a
year-over-year rise of 6.5%).
Discover Financial reported fourth-quarter 2013 results on Jan
23, 2014. Operating earnings per share stood at $1.23, surpassing
the Zacks Consensus Estimate by 5.1%. Results also improved 16%
year over year. Loan growth and share repurchases mainly
contributed to the improvement. Additionally, this financial
services company delivered positive earnings surprises in 3 out
of the last 4 quarters, with an average beat of 9.1%.
Discover Financial's top line also fared well on the back of loan
growth and higher net interest margin in the Direct Banking
segment as well as growth in card sales volume. Segment wise, the
Direct Banking segment performed well while the Payments Service
segment did not show signs of recovery.
Going forward, the collaboration with the FIDO (Fast IDentity
Online) Alliance is expected to help the company to secure
information and enhance customer satisfaction, thereby bolstering
top-line growth further. Moreover, the launch of new franchises
in countries like China, Russia and India, launching products
like Cashback, home equity installment loans and the initiation
of the FICO scores on the "Discover it" cards, strengthen the
future prospects of Discover Financial. The long-term growth rate
of this stock is 10.5%.
Other Stocks to Consider
Other players in the financial services space which look
attractive at current levels, include
Fidelity National Information Services, Inc.
Heartland Payment Systems, Inc.
). While Fidelity and Heartland carry a Zacks Rank #1 (Strong
Buy), MasterCard shares the same Zacks Rank as Discover
DISCOVER FIN SV (DFS): Free Stock Analysis
FIDELITY NAT IN (FIS): Free Stock Analysis
HEARTLAND PAYMT (HPY): Free Stock Analysis
MASTERCARD INC (MA): Free Stock Analysis
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