We expect direct banking and payment services company,
Discover Financial Services
) to beat expectations when it reports second-quarter 2014 earnings
on Jul 22, 2014.
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
, which represents the difference between the Most Accurate
Estimate and the Zacks Consensus Estimate, is +0.77%. This is very
meaningful and a leading indicator of a likely positive earnings
surprise for shares.
Discover Financial carries a Zacks Rank #2 (Buy). Note that stocks
with Zacks Ranks #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 earnings announcement.
The combination of Discover Financial's Zacks Rank #2 (Buy) and
+0.77% ESP makes us confident of an earnings beat in the coming
What's Driving the Better-Than-Expected Earnings?
An improvement in consumer spending, wallet share and credit
quality trends are expected to lead to a positive earnings surprise
in the quarter. Additionally, the introduction of new interest
fixed and variable interest rates on student loan applications in
the past quarter is expected to draw a greater number of students,
thereby increasing Discover Financial's student loan
Moreover, the merchant acquiring agreement in association with
Bangkok Bank should contribute positively to earnings. This is
because the deal enables Bangkok Bank's merchants to accept Diners
Club International, Discover, BC Global, DinaCard and RuPay cards -
all coming under the Discover Global Network
The positive trend is seen in the trailing four-quarter average
surprise of 4.46%, which was greatly aided by the 4.80% surprise in
the last reported quarter. This was possible because Discover
Financial was successful in increasing student loan originations
and expanding its international foothold.
Other Stocks to Consider
Discover Financial is not the only stock looking up this
earnings season. We also see likely earnings beats coming from
these three companies in the same sector:
Credit Acceptance Corp.
) has Earnings ESP of +2.39% and a Zacks Rank #2.
Santander Consumer USA Holdings Inc.
) has Earnings ESP of +3.23% and a Zacks Rank #3 (Hold).
World Acceptance Corp.
) has Earnings ESP of +3.64% and a Zacks Rank #3.
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DISCOVER FIN SV (DFS): Free Stock Analysis
SANTANDER CNSMR (SC): Free Stock Analysis
WORLD ACCEPTANC (WRLD): Free Stock Analysis
CREDIT ACCEPT (CACC): Free Stock Analysis
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