Earnings Preview: Discover Financial Services

| About: Discover Financial (DFS)
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Company Profile

Discover Financial Services (NYSE:DFS), a bank holding company, offers direct banking and payment services in the United States. It operates in two segments, Direct Banking and Payment Services.

Discover Financial Services is scheduled to report its second-quarter earnings results on June 19, 2012, before the market open.

Technical Overview

Click to enlarge all images.

Discover Financial Services has a market cap of $17.50 billion and is currently trading around $33.01 with a 52-week range of $20.31 to $34.75. The stock has risen 37.33% year to date. The following table provides the key financial ratios for Discover Financial Services:

Key Ratio






Forward P/E


Profit Margin


Return On Assets (ROA)


Return On Equity (ROE)


Recent News

  • On June 14, 2012, The board of directors of Discover Financial Services declared a quarterly dividend of $0.10 per share of common stock, payable on July 19, 2012, to stockholders of record on July 5, 2012.
  • On June 12, 2012, Discover began originating mortgages with its launch of Discover Home Loans, a new source for consumers seeking prime variable- and fixed-rate conventional and FHA loans from a trusted name in the financial services industry.
  • On May 30, 2012, Discover and Ducks Unlimited announced during the 75th Annual Ducks Unlimited convention the launch of an affinity credit card designed to offer U.S. members of Ducks Unlimited rewarding Discover card benefits.
  • On May 21, 2012, Discover Student Loans, one of the largest originators of private student loans in the United States, announced new fixed-rate loans for undergraduate and graduate students with rates as low as 6.79 percent APR.

Here's a list of recent changes to analyst ratings:

  • On June 13, 2012, Barclays reiterated an OVERWEIGHT rating on Discover Financial and raised the price target from $37.00 to $39.00.
  • On June 3, 2012, Ativo Research downgraded Discover Financial Services from FAVORABLE to NEUTRAL.
  • On May 31, 2012, EVA Dimensions, LLC downgraded Discover Financial Services from OVERWEIGHT to HOLD.
  • On May 8, 2012, Thomas White/Global Capital downgraded Discover Financial Services from MOST FAVORABLE to FAVORABLE.
  • On April 16, 2012, Ford Equity Research downgraded Discover Financial Services from MOST FAVORABLE to FAVORABLE.
  • On April 14, 2012, Ford Equity Research upgraded Discover Financial Services from FAVORABLE to MOST FAVORABLE.
  • On March 26, 2012, Thomson Reuters/Verus downgraded Discover Financial Services from BUY to HOLD.
  • On March 23, 2012, Ativo Research upgraded Discover Financial Services from NEUTRAL to FAVORABLE.
  • On March 23, 2012, Nomura Securities reiterated a BUY rating on Discover Financial and raised the price target from $30 to $38.
  • On March 23, 2012, Goldman Sachs upgraded Discover Financial from NEUTRAL to CONVICTION BUY and raised the price target from $36 to $39.

Analyst Guidance and Earnings History

The second-quarter revenues are expected to be $1.86 billion when compared to $1.74 billion for the same quarter last year. Earnings per share for the second quarter are expected to be 99 cents a share, down from a $1.09 a share in the year-ago period.

The average price target from analyst for Discover Financial Services is $37.9, with an average rating of OVERWEIGHT.

Out of the last four quarters, Discover Financial Services has met or exceeded the EPS estimates all the four times. The following chart shows the analysts' estimates history and the actual EPS results:

The following chart shows the annual summary of Sales and Net income for Discover Financial Services:


American Express (NYSE:AXP), Visa (NYSE:V), and MasterCard (NYSE:MA) are considered as major competitors for Discover Financial and the table below provides the key metrics for these companies:

Name Discover Financial Services
American Express
Visa MasterCard
Price $32.89 $55.75 $119.64 $425.18
Year-To-Date Price 41.77% 16.26% 58.12% 60.00%
Market Capitalization $17.5B $64.8B $96.4B $53.9B
Earnings per Share 4.4 4.18 6.09 15.9
Total Revenue $8.6B $32.8B $9.8B $7.0B
Employees (Full-Time) 11650 62500 7500 6700

Some of the data is taken from Google Finance, Yahoo Finance, Finviz, and investor sites.

Disclosure: I am long V. I change my positions very frequently and may initiate either long or short positions in the above mentioned stocks at any time.

Disclaimer: I am not a registered investment advisor and do not provide specific investment advice. The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. It is up to investors to make the correct decision after necessary research.