Is A Beat In Store For Discover Financial (DFS) Q3 Earnings?
Zacks Investment Research | Oct 18, 2019 12:03AM ET
Discover Financial Services (NYSE:DFS) will release third-quarter 2019 results on Oct 22 after market close.
The Zacks Consensus Estimate for the company’s third-quarter earnings is pegged at $2.29, suggesting a rise of 11.7% from the year-ago reported figure.
In the last reported quarter, the company’s earnings of $2.32 per share beat the Zacks Consensus Estimate by 10%. Moreover, the bottom line improved 21.5% year over year on higher revenues.
Let’s see how things are shaping up prior to this announcement.
Factors at Play
Higher card sales leading to a steady revenue stream might have favored the company’s third-quarter earnings.
Revenues are also expected to have improved on the back of an increase in net interest income and total other income of the company. The Zacks Consensus Estimate for revenues stands at $2.88 billion, indicating 5.8% growth from the prior-year reported number.
The company is likely to have witnessed a strong credit performance. The network transaction volume is expected to have contributed to the company’s performance as well.
Its Direct Banking Business, aided by loan growth and net interest margin expansion, is likely to have provided cushion to the company’s overall performance. Net interest income at the segment might have increased in the third quarter of 2019. The consensus mark for the same stands at $239 million, implying an increase of 7.9% from the year-earlier reported figure.
Discover Financial is likely to have invested in fueling its overall growth and capabilities. However, such investments and growth initiatives might have induced a rise in operating expenses of the company.
The company’s overdependence on debt is evident from its 2017 and 2018 debt-to-equity ratio of 242% and 244.6%, respectively. This might have continued to remain at elevated levels in the third quarter.
Key Developments in Q3
In September 2019, Discover Home Equity Loans achieved a breakthrough point by crossing the $1-billion mark in loan balance and doubling origination volume in each of the last couple of years. This landmark feat has made it the second biggest originator of closed-end second mortgages in the United States.
What Our Quantitative Model States
Our proven model predicts an earnings beat for Discover Financial this time around. The combination of a positive Original post
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