Can Card Sales Aid Discover Financial's (DFS) Q4 Earnings?
Zacks Investment Research | Jan 19, 2020 09:03PM ET
Discover Financial Services (NYSE:DFS) will release fourth-quarter 2019 results on Jan 24 after market close.
The company’s third-quarter earnings benefited from high revenues, solid loan growth, and its strong Direct Baking and Payments Services segments. Adjusted earnings of $2.36 beat the Zacks Consensus Estimate by 3.1% and also improved 15.1% year over year in the third-quarter.
The company has been consistently delivering a steady performance over the past several quarters, riding on growth in card sales, which in turn, contributed to its revenue base.
Let’s see, how things are shaping up prior to this announcement.
The Zacks Consensus Estimate for the company’s fourth-quarter earnings is pegged at $2.23, indicating an increase of 9.3% from the prior-year reported figure. This upside is expected to have been led by card sales, which in turn, might have aided revenue growth.
Discover Financial has most likely continued to enhance its portfolio and added to its capabilities in the fourth quarter through strategic alliances, which in turn, might have provide sufficient support to its top line.
In the quarter to be reported, the company is likely to have constantly witnessed favorable results on the back of its healthy mix of sales volume from both new and current customers.
The Zacks Consensus Estimate for revenues stands at $29.5 billion, suggesting 4.9% improvement from the prior-year reported figure. The metric is expected to have climbed on higher card sales, better net interest income and higher other total income of the company.
Its Direct Banking Business, driven by loan growth and net interest margin expansion, is expected to have uplifted the company’s overall performance in the to-be-reported quarter. The Zacks Consensus Estimate for net interest income from the segment implies an upside of 6.3% from the year-earlier reported number.
The company might have been consistent with share buybacks, which should further favor its bottom line.
However, investments in technology and growth initiatives might have induced an escalation in overall expenses, thereby compressing margins.
What the Quantitative Model States
Our proven model does not conclusively predict an earnings beat for Discover Financial this reporting cycle. This is because the stock needs to have the right combination of a positive Original post
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