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Discover Financial (DFS) Beats on Q1 Earnings and Revenues
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Discover Financial Services’ (DFS - Free Report) first-quarter 2018 adjusted earnings of $1.82 per share surpassed the Zacks Consensus Estimate by 2.8%. The bottom line also rose 27% year over year on higher revenues.
Operational Update
For the reported quarter, the company’s revenue net of interest expenses increased 10% year over year to $2.6 billion, driven by strong loan and revenue growth across segments. The top line also slightly beat the Zacks Consensus Estimate by 0.5%.
Consumer deposits grew 11% from the year-ago quarter to $41.3 billion.
Interest expenses of $469 million jumped 21% year over year.
Total other expenses increased 9.3% to $968 million due to higher employee compensation and benefits, marketing and business Development expenses as well as professional fees.
Segment Update
Direct Banking Segment
This segment’s pre-tax income declined 1.6% to $811 million.
Total loans increased 9% year over year to $82.7 billion.
Credit card loans rose 10% to $65.6 billion.
Personal loans increased 10%, private student loans increased 3% and climbed 11% excluding purchased student loans, all on a year-over-year basis.
Net interest income increased 11% to $2.1 billion from the prior year, driven by loan growth and a higher net interest margin. Net interest margin was 10.23%, up 16 basis points from the year-ago quarter.
Other income rose 5% from the comparable quarter last year, driven by higher discount and interchange revenues.
Provision for loan loss of $751 million increased 28% year over year due to higher net charge-offs and a higher reserve build.
Payment Services Segment
Payment Services pretax income was $45 million in the quarter, up 2.2% from the year-earlier quarter.
Payment Services transaction dollar volume was $56.1 billion, up 19% from the prior-year-quarter.
PULSE transaction dollar volume went up 20% year over year, driven by merchant and acquirer routing decisions.
Diners Club International volume rose 14% from the year-ago quarter, driven by a continued strength of newer franchise relationships.
Network Partners volume expanded 24%, backed by AribaPay.
Discover Financial Services Price, Consensus and EPS Surprise
Among other players in the Finance sector that have reported first-quarter earnings so far, Bank of America Corporation (BAC - Free Report) , Citigroup Inc. (C - Free Report) and U.S. Bancorp (USB - Free Report) beat the respective Zacks Consensus Estimate.
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Discover Financial (DFS) Beats on Q1 Earnings and Revenues
Discover Financial Services’ (DFS - Free Report) first-quarter 2018 adjusted earnings of $1.82 per share surpassed the Zacks Consensus Estimate by 2.8%. The bottom line also rose 27% year over year on higher revenues.
Operational Update
For the reported quarter, the company’s revenue net of interest expenses increased 10% year over year to $2.6 billion, driven by strong loan and revenue growth across segments. The top line also slightly beat the Zacks Consensus Estimate by 0.5%.
Consumer deposits grew 11% from the year-ago quarter to $41.3 billion.
Interest expenses of $469 million jumped 21% year over year.
Total other expenses increased 9.3% to $968 million due to higher employee compensation and benefits, marketing and business Development expenses as well as professional fees.
Segment Update
Direct Banking Segment
This segment’s pre-tax income declined 1.6% to $811 million.
Total loans increased 9% year over year to $82.7 billion.
Credit card loans rose 10% to $65.6 billion.
Personal loans increased 10%, private student loans increased 3% and climbed 11% excluding purchased student loans, all on a year-over-year basis.
Net interest income increased 11% to $2.1 billion from the prior year, driven by loan growth and a higher net interest margin. Net interest margin was 10.23%, up 16 basis points from the year-ago quarter.
Other income rose 5% from the comparable quarter last year, driven by higher discount and interchange revenues.
Provision for loan loss of $751 million increased 28% year over year due to higher net charge-offs and a higher reserve build.
Payment Services Segment
Payment Services pretax income was $45 million in the quarter, up 2.2% from the year-earlier quarter.
Payment Services transaction dollar volume was $56.1 billion, up 19% from the prior-year-quarter.
PULSE transaction dollar volume went up 20% year over year, driven by merchant and acquirer routing decisions.
Diners Club International volume rose 14% from the year-ago quarter, driven by a continued strength of newer franchise relationships.
Network Partners volume expanded 24%, backed by AribaPay.
Discover Financial Services Price, Consensus and EPS Surprise
Discover Financial Services Price, Consensus and EPS Surprise | Discover Financial Services Quote
Financial Position
Discover Financial had total assets worth $102 billion as of Mar 31, 2018, up 7.6% year over year.
Total liabilities as of Mar 31, 2018 were $91 billion, up 9% year over year.
Total equity was $10.9 billion on Mar 31, 2018, down 3.5% year over year.
Discover Financial’s return on equity for the first quarter was 25%.
Share Repurchase Update
During the first quarter, the company repurchased approximately 7.5 million shares of common stock for $584 million.
Zacks Rank and Performance of Other Peers
Discover Financial carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other players in the Finance sector that have reported first-quarter earnings so far, Bank of America Corporation (BAC - Free Report) , Citigroup Inc. (C - Free Report) and U.S. Bancorp (USB - Free Report) beat the respective Zacks Consensus Estimate.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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