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Is a Beat in Store for Discover Financial (DFS) in Q4 Earnings?
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Discover Financial Services (DFS - Free Report) is slated to report fourth-quarter 2022 results on Jan 18, 2023, after the market closes.
Q4 Estimates
The Zacks Consensus Estimate for Discover Financial’s fourth-quarter earnings per share (EPS) is pegged at $3.58, which indicates a decline of 1.6% from the prior-year quarter’s reported figure.
The consensus mark for revenues stands at $3,649 million, suggesting 24.3% growth from the year-ago quarter’s reported number. Our estimate indicates total revenues of $3,532.9 million in the fourth quarter.
Earnings Surprise History
Discover Financial boasts a decent earnings surprise history. Its bottom line beat estimates in three of the trailing four quarters and missed the mark once, the average being 5.26%. This is depicted in the chart below:
Discover Financial Services Price and EPS Surprise
Our proven model predicts 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, which is precisely the case here.
Earnings ESP: Discover Financial has an Earnings ESP of +0.96% because the Most Accurate Estimate of $3.62 is pegged higher than the Zacks Consensus Estimate of $3.58. You can uncover the best stocks before they're reported with our Earnings ESP Filter.
Discover Financial’s revenues are expected to have gained on higher net interest income, which in turn, is likely to have been driven by growing average receivables and improved net interest margin in the fourth quarter.
The Zacks Consensus Estimate for the net interest income of DFS is pegged at $2,994 million, indicating 20.6% growth from the prior-year quarter’s reported figure. Our estimate for the metric stands at $2,890.7 million.
Solid sales, higher new account acquisitions and improved payment rates are expected to have boosted average receivable growth in the to-be-reported quarter. Meanwhile, DFS’s net interest margin is likely to be aided by prime rate increases.
The top line of Discover Financial is expected to have benefited from increased non-interest income in the fourth quarter. Improved net discount and interchange revenue riding on robust sales and a favorable sales mix are likely to have contributed to the non-interest income of DFS. However, strong sales usually give rise to elevated reward expenses, which might act as a partial offset to the non-interest income.
The consensus mark for non-interest income is pegged at $642 million, suggesting a 41.7% surge from the prior-year quarter’s reported number, which matched our estimate.
Strong performances of the Digital Banking and Payment Services segments are likely to have provided an impetus to the performance of Discover Financial in the to-be-reported quarter.
Improved net interest income is likely to have aided the results of the Digital Banking segment. Higher PULSE and Diners Club volume resulting from increased debit transaction volume and, rebounding travel and entertainment spending are expected to have benefited the Payment Services unit.
However, the bottom line of Discover Financial is likely to have suffered a blow due to escalating compensation costs, marketing expenses and professional fees. Marketing costs and professional fees are likely to have witnessed an increase due to DFS’s investments in technology and card and consumer banking products.
Stocks to Consider
Here are some other companies from the Finance space, which according to model have the right combination of elements to beat on earnings this time around:
First Industrial Realty Trust, Inc. (FR - Free Report) has an Earnings ESP of +7.65% and a Zacks Rank of 2 at present. The Zacks Consensus Estimate for FR’s fourth-quarter 2022 earnings stands at 57 cents per share, indicating a 9.6% rise from the prior-year quarter’s reported figure.
First Industrial Realty’s bottom line outpaced estimates in each of the trailing four quarters, the average surprise being 4.17%.
Essential Properties Realty Trust, Inc. (EPRT - Free Report) has an Earnings ESP of +2.09% and a Zacks Rank of 2, currently. The Zacks Consensus Estimate for EPRT’s fourth-quarter 2022 earnings is pegged at 38 cents per share, suggesting 2.7% growth from the prior-year quarter’s reported number.
Essential Properties’ earnings beat estimates in two of the trailing four quarters and met the mark twice, the average surprise being 2.10%.
Boston Properties, Inc. (BXP - Free Report) has an Earnings ESP of +0.62% and a Zacks Rank of 3 at present. The Zacks Consensus Estimate for BXP’s fourth-quarter 2022 earnings stands at $1.84 per share, suggesting an improvement of 18.7% from the prior-year quarter’s reported figure.
Boston Properties’ bottom line surpassed estimates in each of the trailing four quarters, the average surprise being 3.39%.
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Is a Beat in Store for Discover Financial (DFS) in Q4 Earnings?
Discover Financial Services (DFS - Free Report) is slated to report fourth-quarter 2022 results on Jan 18, 2023, after the market closes.
Q4 Estimates
The Zacks Consensus Estimate for Discover Financial’s fourth-quarter earnings per share (EPS) is pegged at $3.58, which indicates a decline of 1.6% from the prior-year quarter’s reported figure.
The consensus mark for revenues stands at $3,649 million, suggesting 24.3% growth from the year-ago quarter’s reported number. Our estimate indicates total revenues of $3,532.9 million in the fourth quarter.
Earnings Surprise History
Discover Financial boasts a decent earnings surprise history. Its bottom line beat estimates in three of the trailing four quarters and missed the mark once, the average being 5.26%. This is depicted in the chart below:
Discover Financial Services Price and EPS Surprise
Discover Financial Services price-eps-surprise | Discover Financial Services Quote
What Our Quantitative Model Unveils
Our proven model predicts 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, which is precisely the case here.
Earnings ESP: Discover Financial has an Earnings ESP of +0.96% because the Most Accurate Estimate of $3.62 is pegged higher than the Zacks Consensus Estimate of $3.58. You can uncover the best stocks before they're reported with our Earnings ESP Filter.
Zacks Rank: DFS currently carries a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here.
Factors to Note
Discover Financial’s revenues are expected to have gained on higher net interest income, which in turn, is likely to have been driven by growing average receivables and improved net interest margin in the fourth quarter.
The Zacks Consensus Estimate for the net interest income of DFS is pegged at $2,994 million, indicating 20.6% growth from the prior-year quarter’s reported figure. Our estimate for the metric stands at $2,890.7 million.
Solid sales, higher new account acquisitions and improved payment rates are expected to have boosted average receivable growth in the to-be-reported quarter. Meanwhile, DFS’s net interest margin is likely to be aided by prime rate increases.
The top line of Discover Financial is expected to have benefited from increased non-interest income in the fourth quarter. Improved net discount and interchange revenue riding on robust sales and a favorable sales mix are likely to have contributed to the non-interest income of DFS. However, strong sales usually give rise to elevated reward expenses, which might act as a partial offset to the non-interest income.
The consensus mark for non-interest income is pegged at $642 million, suggesting a 41.7% surge from the prior-year quarter’s reported number, which matched our estimate.
Strong performances of the Digital Banking and Payment Services segments are likely to have provided an impetus to the performance of Discover Financial in the to-be-reported quarter.
Improved net interest income is likely to have aided the results of the Digital Banking segment. Higher PULSE and Diners Club volume resulting from increased debit transaction volume and, rebounding travel and entertainment spending are expected to have benefited the Payment Services unit.
However, the bottom line of Discover Financial is likely to have suffered a blow due to escalating compensation costs, marketing expenses and professional fees. Marketing costs and professional fees are likely to have witnessed an increase due to DFS’s investments in technology and card and consumer banking products.
Stocks to Consider
Here are some other companies from the Finance space, which according to model have the right combination of elements to beat on earnings this time around:
First Industrial Realty Trust, Inc. (FR - Free Report) has an Earnings ESP of +7.65% and a Zacks Rank of 2 at present. The Zacks Consensus Estimate for FR’s fourth-quarter 2022 earnings stands at 57 cents per share, indicating a 9.6% rise from the prior-year quarter’s reported figure.
First Industrial Realty’s bottom line outpaced estimates in each of the trailing four quarters, the average surprise being 4.17%.
Essential Properties Realty Trust, Inc. (EPRT - Free Report) has an Earnings ESP of +2.09% and a Zacks Rank of 2, currently. The Zacks Consensus Estimate for EPRT’s fourth-quarter 2022 earnings is pegged at 38 cents per share, suggesting 2.7% growth from the prior-year quarter’s reported number.
Essential Properties’ earnings beat estimates in two of the trailing four quarters and met the mark twice, the average surprise being 2.10%.
Boston Properties, Inc. (BXP - Free Report) has an Earnings ESP of +0.62% and a Zacks Rank of 3 at present. The Zacks Consensus Estimate for BXP’s fourth-quarter 2022 earnings stands at $1.84 per share, suggesting an improvement of 18.7% from the prior-year quarter’s reported figure.
Boston Properties’ bottom line surpassed estimates in each of the trailing four quarters, the average surprise being 3.39%.
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