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Discover Financial (DFS) Beats Q4 Earnings and Revenues
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Discover Financial Services’ (DFS - Free Report) fourth-quarter 2017 adjusted earnings of $1.55 per share surpassed the Zacks Consensus Estimate by 1.3%. The bottom line also rose 10.7% year over year driven by strong loan and revenue growth across segments.
Including non-recurring charges and pre-tax expenses, net income per share came at 99 cents in the fourth quarter, down 29% year over year.
For 2017, the company reported net income of $5.42 per share, down 6% from the prior-year quarter.
Operational Update
For the reported quarter, the company’s revenue net of interest expenses increased 11% year over year to $2.6 billion. The top line also surpassed the Zacks Consensus Estimate by 41%.
For 2017, revenue net of interest expenses increased 9% year over year to $9.9 billion.
Consumer deposits grew 9% from the year-ago quarter to $84.2 billion.
Interest expenses of $436 million jumped 19% year over year.
Total other expenses increased 15% to $1 billion due to higher employee compensation and benefits, marketing and business Development expenses and professional fees.
Segment Update
Direct Banking Segment
This segment’s pre-tax income rose 0.2% to $870 million. This was because higher revenues were partially offset by increased provision for loan losses and operating expenses.
Total loans increased 9% year over year to $84.2 billion.
Credit card loans rose 9% to $67.3 billion.
Personal loans increased 14%, private student loans increased 2% and jumped 11% excluding purchased student loans, all on a year-over-year basis.
Net interest income increased 12% to $2.1 billion from the prior year, driven by loan growth and a higher net interest margin. Net interest margin was 10.28%, up 21 basis points from the prior-year quarter.
Total other income rose 6% to $494 million from the prior-year quarter, driven by higher discount and interchange revenues.
Provision for loan losses of $678 million increased 17% year over year due to higher net charge-offs, partially offset by a smaller reserve build.
Payment Services Segment
Payment Services pretax income was $29 million in the quarter, up 93% from $15 million in the year-ago quarter. The rise was primarily driven by higher transaction processing revenues and interchange revenues as well as lower operating expenses.
Payment Services transaction dollar volume was $54 billion, up 17% from the prior-year-quarter.
PULSE transaction dollar volume went up 19% year over year.
Diners Club International volume rose 14% from the last-year quarter, driven by continued strength of newer franchise relationships.
Network Partners volume increased 1.4%.
Discover Financial Services Price, Consensus and EPS Surprise
Among other players in the Finance sector that have reported their fourth-quarter earnings so far, American Express Company (AXP - Free Report) , Total System Services, Inc. and Navient Corporation (NAVI - Free Report) beat their respective Zacks Consensus Estimate.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Discover Financial (DFS) Beats Q4 Earnings and Revenues
Discover Financial Services’ (DFS - Free Report) fourth-quarter 2017 adjusted earnings of $1.55 per share surpassed the Zacks Consensus Estimate by 1.3%. The bottom line also rose 10.7% year over year driven by strong loan and revenue growth across segments.
Including non-recurring charges and pre-tax expenses, net income per share came at 99 cents in the fourth quarter, down 29% year over year.
For 2017, the company reported net income of $5.42 per share, down 6% from the prior-year quarter.
Operational Update
For the reported quarter, the company’s revenue net of interest expenses increased 11% year over year to $2.6 billion. The top line also surpassed the Zacks Consensus Estimate by 41%.
For 2017, revenue net of interest expenses increased 9% year over year to $9.9 billion.
Consumer deposits grew 9% from the year-ago quarter to $84.2 billion.
Interest expenses of $436 million jumped 19% year over year.
Total other expenses increased 15% to $1 billion due to higher employee compensation and benefits, marketing and business Development expenses and professional fees.
Segment Update
Direct Banking Segment
This segment’s pre-tax income rose 0.2% to $870 million. This was because higher revenues were partially offset by increased provision for loan losses and operating expenses.
Total loans increased 9% year over year to $84.2 billion.
Credit card loans rose 9% to $67.3 billion.
Personal loans increased 14%, private student loans increased 2% and jumped 11% excluding purchased student loans, all on a year-over-year basis.
Net interest income increased 12% to $2.1 billion from the prior year, driven by loan growth and a higher net interest margin. Net interest margin was 10.28%, up 21 basis points from the prior-year quarter.
Total other income rose 6% to $494 million from the prior-year quarter, driven by higher discount and interchange revenues.
Provision for loan losses of $678 million increased 17% year over year due to higher net charge-offs, partially offset by a smaller reserve build.
Payment Services Segment
Payment Services pretax income was $29 million in the quarter, up 93% from $15 million in the year-ago quarter. The rise was primarily driven by higher transaction processing revenues and interchange revenues as well as lower operating expenses.
Payment Services transaction dollar volume was $54 billion, up 17% from the prior-year-quarter.
PULSE transaction dollar volume went up 19% year over year.
Diners Club International volume rose 14% from the last-year quarter, driven by continued strength of newer franchise relationships.
Network Partners volume increased 1.4%.
Discover Financial Services Price, Consensus and EPS Surprise
Discover Financial Services Price, Consensus and EPS Surprise | Discover Financial Services Quote
Financial Position
Discover Financial had total assets worth $100.1 billion as of Dec 31, 2017, up 8.4% year over year.
Total liabilities as of Dec 31, 2017 were $89.2 billion, up 10% year over year.
Total equity was $10.9 billion on Dec 31, 2017, down 3.8% year over year.
Discover Financial’s return on equity for the fourth quarter was 14%.
Share Repurchase Update
During the fourth quarter, the company repurchased approximately 8.1 million shares of common stock for $555 million.
Shares of common stock outstanding declined 2.2% from the prior quarter.
Zacks Rank and Performance of Other Peers
Discover Financial sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Among other players in the Finance sector that have reported their fourth-quarter earnings so far, American Express Company (AXP - Free Report) , Total System Services, Inc. and Navient Corporation (NAVI - Free Report) beat their respective Zacks Consensus Estimate.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>