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What to Expect From Discover Financial (DFS) Q3 Earnings
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Discover Financial Services (DFS - Free Report) is scheduled to release third-quarter 2022 results on Oct 24, after the closing bell.
Q3 Estimates
The Zacks Consensus Estimate for Discover Financial’s third-quarter earnings per share (EPS) is pegged at $3.65, indicating a rise of 3.1% from the prior-year quarter’s reported figure. Our estimate suggests an EPS of $3.68 for the to-be-reported quarter.
The consensus mark for revenues stands at $3.4 billion, suggesting 20.8% growth from the year-ago quarter’s reported number. Our estimate indicates total revenues of $3.2 billion for the third quarter.
Earnings Surprise History
Discover Financial boasts an impressive earnings surprise history. Its bottom line beat estimates in each of the trailing four quarters, the average being 6.96%. This is depicted in the chart below:
Discover Financial Services Price and EPS Surprise
In the third quarter, revenues of Discover Financial are likely to have benefited on the back of an improved net interest income, which in turn, is expected to have been aided by increased average receivables, better net interest margin and lower interest charge-offs.
Robust sales and new account growth are likely to have contributed to DFS’s loan growth. However, increased funding costs and elevated delinquency trends might have partially offset net interest income growth in the to-be-reported quarter.
The Zacks Consensus Estimate for Discover Financial’s net interest income is pegged at $2.7 billion, which indicates a 13.2% rise from the prior-year quarter’s reported figure. Our estimate for the metric is $2.6 billion.
Non-interest income of DFS is expected to have been aided by an improved loan fee income, protection products revenues and transaction processing revenues in the third quarter. This, in turn, is likely to have boosted its overall revenue growth. The consensus mark for non-interest income stands at $584 million (suggesting 57% growth from the prior-year reported number), while our estimate indicates the metric to be $625.5 million.
Sound performances of the Digital Banking and Payment Services segments are also likely to have driven revenues of Discover Financial in the to-be-reported quarter. Increased net interest income is likely to have provided an impetus to the Digital Banking segment's performance. Also, higher transaction processing revenues, resulting from increased transactions processed on the Discover Global Network, are expected to have benefited the Payment Services segment.
However, margins of Discover Financial are likely to have taken a hit from escalating operating expenses resulting from higher marketing expenses undertaken for expanding card and consumer-banking products. Increased compensation costs, probably stemming from the labor-shortage issue plaguing the entire United States and denting a company’s margins, might have weighed on DFS’s bottom line.
What Our Quantitative Model Predicts
Our proven model does not conclusively predict an earnings beat for Discover Financial this time around. 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. However, that’s not the case here as elaborated below.
Earnings ESP: Discover Financial has an Earnings ESP of -2.46% because the Most Accurate Estimate of $3.56 is pegged lower than the Zacks Consensus Estimate of $3.65. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
While an earnings beat looks uncertain for Discover Financial, here are some companies from the Finance space that you may want to consider, as our model shows that these have the right combination of elements to beat on earnings this time around:
Axos Financial, Inc. (AX - Free Report) has an Earnings ESP of +4.06% and a Zacks Rank of 1, currently. The Zacks Consensus Estimate for AX’s third-quarter 2022 earnings is pegged at $1.13 per share, which indicates a 9.7% improvement from the prior-year quarter’s reported figure.
Axos Financial’s earnings beat estimates in each of the trailing four quarters.
Equity Residential (EQR - Free Report) has an Earnings ESP of +0.40% and a Zacks Rank #2, currently. The Zacks Consensus Estimate for EQR’s third-quarter 2022 earnings is pegged at 91 cents per share, suggesting 18.2% growth from the year-ago quarter’s reported number.
Equity Residential’s earnings beat estimates in three of the trailing four quarters and missed the mark once.
Summit Financial Group, Inc. (SMMF - Free Report) has an Earnings ESP of +3.08% and a Zacks Rank of 3, currently. The Zacks Consensus Estimate for SMMF’s third-quarter 2022 earnings is pegged at $1.14 per share, indicating a 23.9% increase from the prior-year quarter’s reported figure.
Summit Financial’s earnings beat estimates in three of the trailing four quarters and missed the mark once.
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What to Expect From Discover Financial (DFS) Q3 Earnings
Discover Financial Services (DFS - Free Report) is scheduled to release third-quarter 2022 results on Oct 24, after the closing bell.
Q3 Estimates
The Zacks Consensus Estimate for Discover Financial’s third-quarter earnings per share (EPS) is pegged at $3.65, indicating a rise of 3.1% from the prior-year quarter’s reported figure. Our estimate suggests an EPS of $3.68 for the to-be-reported quarter.
The consensus mark for revenues stands at $3.4 billion, suggesting 20.8% growth from the year-ago quarter’s reported number. Our estimate indicates total revenues of $3.2 billion for the third quarter.
Earnings Surprise History
Discover Financial boasts an impressive earnings surprise history. Its bottom line beat estimates in each of the trailing four quarters, the average being 6.96%. This is depicted in the chart below:
Discover Financial Services Price and EPS Surprise
Discover Financial Services price-eps-surprise | Discover Financial Services Quote
Factors to Note
In the third quarter, revenues of Discover Financial are likely to have benefited on the back of an improved net interest income, which in turn, is expected to have been aided by increased average receivables, better net interest margin and lower interest charge-offs.
Robust sales and new account growth are likely to have contributed to DFS’s loan growth. However, increased funding costs and elevated delinquency trends might have partially offset net interest income growth in the to-be-reported quarter.
The Zacks Consensus Estimate for Discover Financial’s net interest income is pegged at $2.7 billion, which indicates a 13.2% rise from the prior-year quarter’s reported figure. Our estimate for the metric is $2.6 billion.
Non-interest income of DFS is expected to have been aided by an improved loan fee income, protection products revenues and transaction processing revenues in the third quarter. This, in turn, is likely to have boosted its overall revenue growth. The consensus mark for non-interest income stands at $584 million (suggesting 57% growth from the prior-year reported number), while our estimate indicates the metric to be $625.5 million.
Sound performances of the Digital Banking and Payment Services segments are also likely to have driven revenues of Discover Financial in the to-be-reported quarter. Increased net interest income is likely to have provided an impetus to the Digital Banking segment's performance. Also, higher transaction processing revenues, resulting from increased transactions processed on the Discover Global Network, are expected to have benefited the Payment Services segment.
However, margins of Discover Financial are likely to have taken a hit from escalating operating expenses resulting from higher marketing expenses undertaken for expanding card and consumer-banking products. Increased compensation costs, probably stemming from the labor-shortage issue plaguing the entire United States and denting a company’s margins, might have weighed on DFS’s bottom line.
What Our Quantitative Model Predicts
Our proven model does not conclusively predict an earnings beat for Discover Financial this time around. 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. However, that’s not the case here as elaborated below.
Earnings ESP: Discover Financial has an Earnings ESP of -2.46% because the Most Accurate Estimate of $3.56 is pegged lower than the Zacks Consensus Estimate of $3.65. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Discover Financial currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks to Consider
While an earnings beat looks uncertain for Discover Financial, here are some companies from the Finance space that you may want to consider, as our model shows that these have the right combination of elements to beat on earnings this time around:
Axos Financial, Inc. (AX - Free Report) has an Earnings ESP of +4.06% and a Zacks Rank of 1, currently. The Zacks Consensus Estimate for AX’s third-quarter 2022 earnings is pegged at $1.13 per share, which indicates a 9.7% improvement from the prior-year quarter’s reported figure.
Axos Financial’s earnings beat estimates in each of the trailing four quarters.
Equity Residential (EQR - Free Report) has an Earnings ESP of +0.40% and a Zacks Rank #2, currently. The Zacks Consensus Estimate for EQR’s third-quarter 2022 earnings is pegged at 91 cents per share, suggesting 18.2% growth from the year-ago quarter’s reported number.
Equity Residential’s earnings beat estimates in three of the trailing four quarters and missed the mark once.
Summit Financial Group, Inc. (SMMF - Free Report) has an Earnings ESP of +3.08% and a Zacks Rank of 3, currently. The Zacks Consensus Estimate for SMMF’s third-quarter 2022 earnings is pegged at $1.14 per share, indicating a 23.9% increase from the prior-year quarter’s reported figure.
Summit Financial’s earnings beat estimates in three of the trailing four quarters and missed the mark once.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.