We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Discover Financial (DFS) Beats on Q4 Earnings & Revenues
Read MoreHide Full Article
Discover Financial Services’ (DFS - Free Report) fourth-quarter 2016 earnings of $1.40 per share beat the Zacks Consensus Estimate of $1.38 by 1.4%. The bottom line also improved 23% year over year. For full-year 2016, earnings came in at $5.77 per share, up 12% from the 2015 figure. Also, the figure beat the Zacks Consensus Estimate of $5.74.
For the reported quarter, the company’s revenues, net of interest expenses, grew 7% year on year to $2.4 billion. The top line also surpassed the Zacks Consensus Estimate of $1.8 billion. For 2016, the company’s revenues, net of interest expenses came in at $9.1 billion, up 4% from the 2015 figure.
For the reported quarter, net interest income grew almost 9% year over year to $1.9 billion, attributable to loan growth and higher net interest margin.
Total other expense decreased 4% to $897 million as the decline recorded in marketing and business development, information processing & communications, professional fees, premises and equipment expenses and other expenses were more than the rise employee compensation and benefits. Segment Update
Direct Banking Segment
This segment’s pre-tax income increased $101 million or 13% from the year-ago quarter to $868 million. This was because higher net interest income and lower operating expenses were partly offset by increased provision for loan losses and lower other income.
Other income decreased 2% year on year to $401 million mainly due to increased promotional rewards and standard rewards.
Provision for loan losses increased 19% to $579 million from the prior year, mainly due to higher net charge-offs.
Discover Financial’s credit card net charge-off rate increased 29 basis points (bps) year over year to 2.47%. The over-30 days’ delinquency rate increased to 2.04%, up 32 bps year on year. Net charge-off rates were higher due to expected seasoning of loan growth.
Total loans increased 7% year over year to $77.2 billion. Personal loans grew 18% to $991 million and credit card loans rose 6% to $61.5 billion year over year. Private student loans inched up 2%. Excluding purchased student loans, however, private student loans grew 13% from the prior year quarter.
Discover Financial’s total card sales volume grew roughly 3% year over year.
Net interest income grew 9% from the prior year to $1.9 billion due to loan growth and higher net interest margin. Net interest margin increased 32 bps year over year to 10.07%.
Expenses decreased 2% year on year to $846 million. Professional fees and marketing expenses declined, whereas employee compensation rose year over year.
Interest expense as a percent of total loans increased 10 bps year over year, mainly due to change in funding mix and higher market rates.
Payment Services Segment
Pre-tax income at Discover Financial’s Payment Services segment fell $6 million to $15 million year over year due to higher expenses.
Payment Services transaction dollar volume was $46.1 billion, flat year over year.
Transaction dollar volume from PULSE declined while Diners Club International’s volumes increased 8% year over year.
Financial Position
Discover Financial had total assets worth $92.3 billion as of Dec 31, 2016 compared with $86.8 billion as of Dec 31, 2015.
Total liabilities as of Dec 31, 2016 were $81 billion compared with $75.5 billion as of Dec 31, 2015.
Total equity was $11.32 billion at the end of Dec 31, 2016 compared with $11.28 billion at the end of Dec 31, 2015.
Discover Financial’s return on equity for the fourth quarter was 20%.
Share Repurchase Update
During the fourth quarter, Discover spent approximately $477 million to repurchase around 7.7 million shares of common stock.
Diluted shares outstanding declined 2% year over year.
Discover Financial Services Price, Consensus and EPS Surprise
Among other firms in the finance space, Ally Financial Inc. (ALLY - Free Report) and Credit Acceptance Corp. (CACC - Free Report) are slated to release results on Jan 31, while Regional Management Corp. (RM - Free Report) is scheduled to release on Feb 7.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>
See More Zacks Research for These Tickers
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Discover Financial (DFS) Beats on Q4 Earnings & Revenues
Discover Financial Services’ (DFS - Free Report) fourth-quarter 2016 earnings of $1.40 per share beat the Zacks Consensus Estimate of $1.38 by 1.4%. The bottom line also improved 23% year over year. For full-year 2016, earnings came in at $5.77 per share, up 12% from the 2015 figure. Also, the figure beat the Zacks Consensus Estimate of $5.74.
For the reported quarter, the company’s revenues, net of interest expenses, grew 7% year on year to $2.4 billion. The top line also surpassed the Zacks Consensus Estimate of $1.8 billion. For 2016, the company’s revenues, net of interest expenses came in at $9.1 billion, up 4% from the 2015 figure.
For the reported quarter, net interest income grew almost 9% year over year to $1.9 billion, attributable to loan growth and higher net interest margin.
Total other expense decreased 4% to $897 million as the decline recorded in marketing and business development, information processing & communications, professional fees, premises and equipment expenses and other expenses were more than the rise employee compensation and benefits.
Segment Update
Direct Banking Segment
This segment’s pre-tax income increased $101 million or 13% from the year-ago quarter to $868 million. This was because higher net interest income and lower operating expenses were partly offset by increased provision for loan losses and lower other income.
Other income decreased 2% year on year to $401 million mainly due to increased promotional rewards and standard rewards.
Provision for loan losses increased 19% to $579 million from the prior year, mainly due to higher net charge-offs.
Discover Financial’s credit card net charge-off rate increased 29 basis points (bps) year over year to 2.47%. The over-30 days’ delinquency rate increased to 2.04%, up 32 bps year on year. Net charge-off rates were higher due to expected seasoning of loan growth.
Total loans increased 7% year over year to $77.2 billion. Personal loans grew 18% to $991 million and credit card loans rose 6% to $61.5 billion year over year. Private student loans inched up 2%. Excluding purchased student loans, however, private student loans grew 13% from the prior year quarter.
Discover Financial’s total card sales volume grew roughly 3% year over year.
Net interest income grew 9% from the prior year to $1.9 billion due to loan growth and higher net interest margin. Net interest margin increased 32 bps year over year to 10.07%.
Expenses decreased 2% year on year to $846 million. Professional fees and marketing expenses declined, whereas employee compensation rose year over year.
Interest expense as a percent of total loans increased 10 bps year over year, mainly due to change in funding mix and higher market rates.
Payment Services Segment
Pre-tax income at Discover Financial’s Payment Services segment fell $6 million to $15 million year over year due to higher expenses.
Payment Services transaction dollar volume was $46.1 billion, flat year over year.
Transaction dollar volume from PULSE declined while Diners Club International’s volumes increased 8% year over year.
Financial Position
Discover Financial had total assets worth $92.3 billion as of Dec 31, 2016 compared with $86.8 billion as of Dec 31, 2015.
Total liabilities as of Dec 31, 2016 were $81 billion compared with $75.5 billion as of Dec 31, 2015.
Total equity was $11.32 billion at the end of Dec 31, 2016 compared with $11.28 billion at the end of Dec 31, 2015.
Discover Financial’s return on equity for the fourth quarter was 20%.
Share Repurchase Update
During the fourth quarter, Discover spent approximately $477 million to repurchase around 7.7 million shares of common stock.
Diluted shares outstanding declined 2% year over year.
Discover Financial Services Price, Consensus and EPS Surprise
Discover Financial Services Price, Consensus and EPS Surprise | Discover Financial Services Quote
Discover Financial presently carries Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other firms in the finance space, Ally Financial Inc. (ALLY - Free Report) and Credit Acceptance Corp. (CACC - Free Report) are slated to release results on Jan 31, while Regional Management Corp. (RM - Free Report) is scheduled to release on Feb 7.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>