Back to top

Image: Bigstock

What's in Store for Discover Financial (DFS) Q4 Earnings?

Read MoreHide Full Article

Discover Financial Services (DFS - Free Report) will release fourth-quarter 2020 results on Jan 20, after market close.

The company’s third-quarter 2020 adjusted earnings of $2.45 per share beat 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 also witnessed a strong credit performance across all loan products.

Let’s see, how things are shaping up prior to this announcement.

Despite the pandemic, the company is expected to have witnessed an improved sales volume in the to-be-reported quarter owing to grocery, retail and home businesses, partly offset by travel and entertainment spending. The Zacks Consensus Estimate for the December quarter’s top line stands at $28.2 billion, suggesting a 3.9% dip from the prior-year period’s reported number due to supressed sales volume in travel and entertainment categories.

The Zacks Consensus Estimate for the company’s fourth-quarter earnings is pegged at $2.27 per share, indicating a 0.9% rise from the prior-year period’s reported figure.

In the to-be-reported quarter, provision for credit losses is expected to have increased due to the current tepid economic outlook.

The company’s performance is likely to have been backed by reducing expenses on lower brand marketing and card acquisition. On its last earnings call, management said that it is on track to achieve the remaining 10% of its $400 million expense reduction in the fourth quarter.

In the fourth quarter, loan fee income of the company might have suffered pandemic-induced tightened spending. The Zacks Consensus Estimate for loan fee income implies a 17.9% drop from the year-ago reported figure.

The Direct Banking segment of the card issuer is likely to have taken a hit from lower net interest income. The Zacks Consensus Estimate for the same is pegged at $2.3 billion, suggesting a decrease of 4.5% from the year-earlier quarter’s reported figure.

The Zacks Consensus Estimate for total network transaction volume hints at a 47.5% decline from the year-ago period’s reported figure due to muted numbers in travel, etc.

What the Quantitative Model States

Our proven model predicts an earnings beat for Discover Financial this reporting cycle. The combination of a positive Earnings ESP  and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Discover Financial has an Earnings ESP of +5.79%. This is because the Most Accurate Estimate is pegged at $2.40, higher than the Zacks Consensus Estimate of $2.27.  You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Discover Financial sports a Zacks Rank of 1, which increases the predictive power of ESP.

Other Stocks to Consider

Some other stocks worth considering from the finance sector with a perfect mix of elements to surpass estimates in the upcoming quarterly releases are as follows:

Capital One Financial Corporation (COF - Free Report) has an Earnings ESP of +3.50% and is presently Zacks #2 Ranked. The company is scheduled to release fourth-quarter earnings on Jan 26.

Synchrony Financial (SYF - Free Report) is set to report fourth-quarter earnings on Jan 29. The stock currently has a Zacks Rank #2 and an Earnings ESP of +1.24%.

Moodys Corporation (MCO - Free Report) is slated to announce fourth-quarter earnings on Feb 10. The stock has an Earnings ESP of +3.78% and is a #3 Ranked player, presently.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>