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Discover Financial Services (DFS - Free Report) reported first-quarter 2021 adjusted earnings of $5.04 per share, beating the Zacks Consensus Estimate of $2.88 by a whopping 75%. Moreover, the bottom line rebounded from the year-ago quarter’s loss of 25 cents per share. The results were driven by a solid credit performance, impressive growth in sales and execution on operating and funding costs.
This upside can also be attributed to a solid performance by its Direct Banking business.
Discover Financial Services Price, Consensus and EPS Surprise
In the reported quarter, the company’s revenues — net of interest expenses — dipped 3.2% year over year to $2.8 billion.
However, the top line beat the Zacks Consensus Estimate by 1.3% on the back of its Direct Banking business. Total loans declined 7% year over year to $86.3 billion.
Interest expenses of $316 million decreased 45.9% year over year.
Total operating expenses decreased 6.7% to $1 billion, driven by lower market and business development costs, information processing, and communication and professional fees.
Segmental Update
Direct Banking Segment
This segment’s pre-tax income came in at $2 billion against the year-ago quarter’s loss of $161 million. This is attributable to a decline in provision for credit losses and reduced operating expenses. However, the same was partly offset by lower revenue net of interest expenses.
Total loans dropped 7% year over year to $86.3 billion. Credit card loans fell 9% to $67.3 billion.
Personal loans were down 9% while private student loans inched up 2%, both on a year-over-year basis. Net interest income slipped 3% year over year due to lower average receivables.
Net interest margin was 10.75%, up 54 basis points from the year-ago quarter.
Payment Services Segment
Payment Services pre-tax income was $52 million in the quarter under review, down 37.3% from the year-earlier period due to the sale of an equity investment in the prior year.
Payment Services volume was up 19% from the prior-year period.
PULSE dollar volume expanded 23% year over year, aided by stimulus funds distributed in January and March 2021 as well as higher average spend per transaction, driven by the pandemic.
Diners Club volume contracted 24% from the year-earlier quarter due to the COVID-19 impact.
Network Partners volume rose 38%, backed by AribaPay.
Strong Financial Position
Discover Financial’s total assets were worth $113.8 billion as of Mar 31, 2021, up 1.1% year over year.
Total liabilities as of Mar 31, 2021 were $101.7 billion, down 1.2% year over year.
Total equity was $12.1 billion on Mar 31, 2021, up 25.8% year over year.
Share Repurchase Update
In the first quarter, the company bought back shares worth $119 million. Shares of common stock outstanding dipped 0.2% from the previous quarter.
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:
Moodys Corporation (MCO - Free Report) has a Zacks Rank of 3 and an Earnings ESP of +2.50% at present. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Owl Rock Capital Corporation has an Earnings ESP of +150.00% and a Zacks Rank #2 (Buy), currently.
Manulife Financial Corp (MFC - Free Report) has an Earnings ESP of +4.65% and a Zacks Rank of 2, presently.
Bitcoin, Like the Internet Itself, Could Change Everything
Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities.
Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly. See 3 crypto-related stocks now >>
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Discover Financial's (DFS) Q1 Earnings Beat, Improve Y/Y
Discover Financial Services (DFS - Free Report) reported first-quarter 2021 adjusted earnings of $5.04 per share, beating the Zacks Consensus Estimate of $2.88 by a whopping 75%. Moreover, the bottom line rebounded from the year-ago quarter’s loss of 25 cents per share. The results were driven by a solid credit performance, impressive growth in sales and execution on operating and funding costs.
This upside can also be attributed to a solid performance by its Direct Banking business.
Discover Financial Services Price, Consensus and EPS Surprise
Discover Financial Services price-consensus-eps-surprise-chart | Discover Financial Services Quote
Operational Update
In the reported quarter, the company’s revenues — net of interest expenses — dipped 3.2% year over year to $2.8 billion.
However, the top line beat the Zacks Consensus Estimate by 1.3% on the back of its Direct Banking business. Total loans declined 7% year over year to $86.3 billion.
Interest expenses of $316 million decreased 45.9% year over year.
Total operating expenses decreased 6.7% to $1 billion, driven by lower market and business development costs, information processing, and communication and professional fees.
Segmental Update
Direct Banking Segment
This segment’s pre-tax income came in at $2 billion against the year-ago quarter’s loss of $161 million. This is attributable to a decline in provision for credit losses and reduced operating expenses. However, the same was partly offset by lower revenue net of interest expenses.
Total loans dropped 7% year over year to $86.3 billion. Credit card loans fell 9% to $67.3 billion.
Personal loans were down 9% while private student loans inched up 2%, both on a year-over-year basis. Net interest income slipped 3% year over year due to lower average receivables.
Net interest margin was 10.75%, up 54 basis points from the year-ago quarter.
Payment Services Segment
Payment Services pre-tax income was $52 million in the quarter under review, down 37.3% from the year-earlier period due to the sale of an equity investment in the prior year.
Payment Services volume was up 19% from the prior-year period.
PULSE dollar volume expanded 23% year over year, aided by stimulus funds distributed in January and March 2021 as well as higher average spend per transaction, driven by the pandemic.
Diners Club volume contracted 24% from the year-earlier quarter due to the COVID-19 impact.
Network Partners volume rose 38%, backed by AribaPay.
Strong Financial Position
Discover Financial’s total assets were worth $113.8 billion as of Mar 31, 2021, up 1.1% year over year.
Total liabilities as of Mar 31, 2021 were $101.7 billion, down 1.2% year over year.
Total equity was $12.1 billion on Mar 31, 2021, up 25.8% year over year.
Share Repurchase Update
In the first quarter, the company bought back shares worth $119 million.
Shares of common stock outstanding dipped 0.2% from the previous quarter.
Zacks Rank
Discover Financial has 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:
Moodys Corporation (MCO - Free Report) has a Zacks Rank of 3 and an Earnings ESP of +2.50% at present. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Owl Rock Capital Corporation has an Earnings ESP of +150.00% and a Zacks Rank #2 (Buy), currently.
Manulife Financial Corp (MFC - Free Report) has an Earnings ESP of +4.65% and a Zacks Rank of 2, presently.
Bitcoin, Like the Internet Itself, Could Change Everything
Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities.
Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
See 3 crypto-related stocks now >>