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On June 27, 2013, Zacks Investment Research upgraded Discover Financial Services (DFS - Analyst Report) to a Zacks Rank #2 (Buy).

Why the Upgrade?

Discover Financial has been witnessing rising earnings estimates on the back of the recent initiatives to expand clientele, including interest rate cuts and strategic alliances. As a result, the Zacks Consensus Estimate for this direct banking and payment services company’s 2013 earnings per share (EPS) stands at $4.78, up 7.25% over 2012.

The most recent among these measures was a cut down in the interest rates on Discover Financial’s fixed rate student loans for undergraduate, graduate and post-graduate students. The company is now offering fixed rate loans with an interest rate beginning at 5.49%. The low rates should help attract more students toward Discover Financial’s student loans, thus boosting the income of the Direct Banking segment of Discover Financial.

Additionally, Discover Financial inked agreements with Barclaycard Global Payment Acceptance, Japan Credit Bureau, Cadence Bank and Nigeria-based Interswitch Limited this year to boost card acceptances and transaction volume.

On Apr 23, 2013, Discover Financial reported first-quarter 2013 EPS of $1.33, surpassing the Zacks Consensus Estimate by 18.75% and year-ago earnings by 9.9%. The positive momentum is expected to continue in the second quarter as well. As a result, the Zacks Consensus Estimate for the second quarter of 2013 is $1.15, up 14.69% over the year-ago quarter.

Other Stocks to Consider

Other companies worth considering in the financial sector are Regional Management Corp. (RM - Snapshot Report) – Zacks Rank #1 (Strong Buy), World Acceptance Corp. (WRLD - Snapshot Report) – Zacks Rank #2 (Buy) and Vantiv, Inc. (VNTV - Snapshot Report) – Zacks Rank #1 (Strong Buy).

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