We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Discover Financial Services (DFS - Free Report) reported third-quarter 2020 adjusted earnings of $2.45 per share, beating the Zacks Consensus Estimate of $1.63 by 50.3%. Moreover, the bottom line improved 3.8% year over year owing to return in sales growth during September. The company witnessed a strong credit performance across all loan products as well.
Operational Update
In the reported quarter, the company’s revenues — net of interest expenses — dropped 6% year over year to $2.7 billion due to lower Discount and Interchange revenue, net, loan fee income and other income. However, the top line beat the Zacks Consensus Estimate by 2.7%.
Total loans declined 4% year over year to $88.7 billion.
Interest expenses of $416 million decreased 34.8% year over year.
Total operating expenses dropped 9.2% to $1 billion due to lower marketing and business development cost, professional fees and other expenses.
Discover Financial Services Price, Consensus and EPS Surprise
This segment’s pre-tax income came in at $917 million compared with the year-ago quarter’s pre-tax income of $943 million. This was due to lower net interest income.
Total loans dipped 4% year over year to $88.7 billion. Credit card loans fell 6% to $69.7 billion.
Personal loans were down 5% while private student loans inched up 3%, both on a year-over-year basis. Net interest income declined 6% year over year, backed by an unfavorble net impact from lower market rates and reduced average receivables.
Net interest margin was 10.19%, down 24 basis points from the year-ago quarter.
Payment Services Segment
Payment Services pre-tax income was $42 million in the quarter under review, down 17.6% from the year-earlier period due to lower PULSE and Network Partners revenues.
Payment Services volume was up 11% from the prior-year period.
PULSE dollar volume expanded 16% year over year, fuelled by higher average spend per transaction related to the pandemic and the impact of stimulus funds available to consumers.
Diners Club volume contracted 30.4% from the year-earlier quarter.
Network Partners volume expanded 34%, backed by AribaPay.
Strong Financial Position
Discover Financial had total assets worth $124.3 billion as of Sep 30, 2020, up 12.2% year over year.
Total liabilities as of Sep 30, 2020 were $114 billion, up 15.2% year over year.
Total equity was $10.2 billion on Sep 30, 2020, down 12.5% year over year.
Share Repurchase Update
It suspended the buyback program in March due to the current economic environment.
Shares of common stock outstanding were flat with the previous quarter’s level.
Some stocks worth considering from the finance sector with a perfect mix of elements to surpass estimates in the upcoming quarterly releases are as follows:
Voya Financial, Inc. (VOYA - Free Report) has an Earnings ESP of +3.75% and a Zacks Rank of 3, currently.
Moodys Corporation (MCO - Free Report) has a Zacks Rank #2 (Buy) and an Earnings ESP of +1.93% at present.
Arthur J. Gallagher Co. (AJG - Free Report) has an Earnings ESP of +1.33% and is presently Zacks #2 Ranked.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better. See these 7 breakthrough stocks now>>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Discover Financial's (DFS) Q3 Earnings Beat, Increase Y/Y
Discover Financial Services (DFS - Free Report) reported third-quarter 2020 adjusted earnings of $2.45 per share, beating the Zacks Consensus Estimate of $1.63 by 50.3%. Moreover, the bottom line improved 3.8% year over year owing to return in sales growth during September. The company witnessed a strong credit performance across all loan products as well.
Operational Update
In the reported quarter, the company’s revenues — net of interest expenses — dropped 6% year over year to $2.7 billion due to lower Discount and Interchange revenue, net, loan fee income and other income. However, the top line beat the Zacks Consensus Estimate by 2.7%.
Total loans declined 4% year over year to $88.7 billion.
Interest expenses of $416 million decreased 34.8% year over year.
Total operating expenses dropped 9.2% to $1 billion due to lower marketing and business development cost, professional fees and other expenses.
Discover Financial Services Price, Consensus and EPS Surprise
Discover Financial Services price-consensus-eps-surprise-chart | Discover Financial Services Quote
Segmental Update
Direct Banking Segment
This segment’s pre-tax income came in at $917 million compared with the year-ago quarter’s pre-tax income of $943 million. This was due to lower net interest income.
Total loans dipped 4% year over year to $88.7 billion. Credit card loans fell 6% to $69.7 billion.
Personal loans were down 5% while private student loans inched up 3%, both on a year-over-year basis. Net interest income declined 6% year over year, backed by an unfavorble net impact from lower market rates and reduced average receivables.
Net interest margin was 10.19%, down 24 basis points from the year-ago quarter.
Payment Services Segment
Payment Services pre-tax income was $42 million in the quarter under review, down 17.6% from the year-earlier period due to lower PULSE and Network Partners revenues.
Payment Services volume was up 11% from the prior-year period.
PULSE dollar volume expanded 16% year over year, fuelled by higher average spend per transaction related to the pandemic and the impact of stimulus funds available to consumers.
Diners Club volume contracted 30.4% from the year-earlier quarter.
Network Partners volume expanded 34%, backed by AribaPay.
Strong Financial Position
Discover Financial had total assets worth $124.3 billion as of Sep 30, 2020, up 12.2% year over year.
Total liabilities as of Sep 30, 2020 were $114 billion, up 15.2% year over year.
Total equity was $10.2 billion on Sep 30, 2020, down 12.5% year over year.
Share Repurchase Update
It suspended the buyback program in March due to the current economic environment.
Shares of common stock outstanding were flat with the previous quarter’s level.
Zacks Rank
Discover Financial carries a Zacks Rank #3 (Hold), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Upcoming Releases From Finance Sector
Some stocks worth considering from the finance sector with a perfect mix of elements to surpass estimates in the upcoming quarterly releases are as follows:
Voya Financial, Inc. (VOYA - Free Report) has an Earnings ESP of +3.75% and a Zacks Rank of 3, currently.
Moodys Corporation (MCO - Free Report) has a Zacks Rank #2 (Buy) and an Earnings ESP of +1.93% at present.
Arthur J. Gallagher Co. (AJG - Free Report) has an Earnings ESP of +1.33% and is presently Zacks #2 Ranked.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>