Discover Financial Services’ ( DFS Quick Quote DFS - Free Report) fourth-quarter 2018 adjusted earnings of $2.03 per share missed the Zacks Consensus Estimate by nearly 3%. However, the bottom line improved 31% year over year on higher revenues and solid loan growth. Operational Update For the reported quarter, revenues, net of interest expenses, increased 7% year over year to $2.8 billion, driven by higher net interest incomes, loan fee income and the company’s other total income. However, the top line lagged the Zacks Consensus Estimate by 0.1%. Total loans grew 7% year over year to $90.5 billion. Interest expenses of $605 million surged 38.8% year over year. Total other expenses rose 7.1% to $1.11 billion due to higher employee compensation and benefits plus other expenses.
Segment Update Direct Banking Segment This segment’s pre-tax income inched up 0.5% to $874 million owing to increase in net interest income. However, the same was largely offset by a rise in provision for loan losses and operating expenses. Total loans climbed 7% year over year to $90.5 billion. Credit card loans augmented 8% to $72.9 billion. Personal loans ascended 1%. Private student loans rose 2% and shot up 9% excluding purchased student loans, all on a year-over-year basis. Net interest income increased 9% year over year, driven by loan growth and net interest margin expansion. Net interest margin was 10.35%, up 7 basis points from the year-ago quarter. Payment Services Segment Payment Services pre-tax income was $23 million, down 20.7% from the year-earlier period, mainly due to growth-related expenditure. Payment Services transaction dollar volume was $60.5 billion, up 12% from the prior-year period. PULSE transaction dollar volume expanded 11% year over year, driven by the impact of new issuers on the network and strong growth from existing issuers. Diners Club volume grew 5% from the year-earlier quarter, banking on consistent newer franchise relationships. Network Partners volume expanded 43%, backed by AribaPay. Strong Financial Position Discover Financial had total assets worth $109.5 billion as of Dec 31, 2018, up 9.5% year over year. Total liabilities as of Dec 31, 2018 were $98.4 billion, up 10.3% year over year. Total equity was $11.1 billion on Dec 31, 2018, up 2.2% year over year. Discover Financial’s return on equity for the fourth quarter was 25%. Share Repurchase Update During the quarter under review, the company repurchased approximately 6.7 million shares of common stock for $466 million. Shares of common stock outstanding dipped 2.1% from the previously reported quarter’s tally. Zacks Rank Discover Financial carries a Zacks Rank #4 (Sell). You can see . the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here Peer Releases From Finance Sector W.R. Berkley Corp. ( WRB Quick Quote WRB - Free Report) is set to release fourth-quarter earnings on Jan 29 and the consensus mark for the same stands at 76 cents per share, in line with the year-ago period’s figure. The stock has a Zacks Rank of 3. Cboe Global Markets, Inc. ( CBOE Quick Quote CBOE - Free Report) is scheduled to report fourth-quarter earnings on Feb 2. The Zacks Consensus Estimate for the same is pegged at $1.35, reflecting a year-over-year rise of 55.2%. The stock carries a Zacks Rank #2 (Buy). Brown & Brown, Inc. ( BRO Quick Quote BRO - Free Report) is slated to announce fourth-quarter earnings on Jan 28. The consensus estimate for earnings is 27 cents, up from 25 cents in the prior-year quarter. The stock holds a Zacks Rank of 2. The Hottest Tech Mega-Trend of All Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early. See Zacks' 3 Best Stocks to Play This Trend >>