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Discover Financial (DFS) Q2 Earnings: What's in the Cards?

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Discover Financial Services (DFS - Free Report) will release second-quarter 2017 results on Jul 26, after market close.

Last quarter, the company delivered a positive earnings surprise of 0.70%. Let’s see how things are shaping up for this announcement.

Factors to be Considered this Quarter

Discover Financial is likely to witness solid revenue growth driven by strong loan growth which is one of its key focus areas.

The company’s PULSE business is likely to continue its recent trend of modest growth.

The recently launched Cashback Match program is expected to aid revenue growth by boosting sustained customer engagement beyond the promotion period.

The company’s frequently undertaken share repurchase programs aimed at enhancing shareholders’ value, is expected to impact the bottom line positively by reducing the outstanding share count.

Nevertheless, Discover Financial’s operating expenses have been showing a flat trend over past few quarters, but marketing expenses are likely to rise due to its extensively undertaken promotional activities.

Also, surging medical costs for individual ACA (Affordable Care Act) compliant products might limit the margin.

In addition, rising level of debt is likely to result in an increase in interest expenses in the second quarter, limiting the margin.

Earnings Whispers

Our proven model does not conclusively show that Discover Financial is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Discover Financial has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.45. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Discover Financial carries a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, we need a positive Earnings ESP to be confident about an earnings beat.

Conversely, we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Discover Financial Services Price and EPS Surprise

Stocks to Consider

Here are some companies from the Finance sector that you may want to consider as they have the right combination of elements to post an earnings beat this quarter:

Sun Life Financial Inc. (SLF - Free Report) has an Earnings ESP of +2.74% and a Zacks Rank #1. The company is slated to report second-quarter earnings results on Aug 9. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cigna Corporation (CI - Free Report) has an Earnings ESP of +0.81% and a Zacks Rank #2. The company is expected to report second-quarter earnings results also on Aug 4.

Aon plc. (AON - Free Report) , which is expected to report second-quarter earnings results on Aug 4, has an Earnings ESP of +0.69% and a Zacks Rank #3.

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