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Discover Financial Services (DFS - Free Report) incurred first-quarter 2020 adjusted loss of 25 cents per share. The Zacks Consensus Estimate was of adjusted earnings of $1.36. Moreover, the bottom line came in against the year-ago quarter’s adjusted earnings of $2.15 per share. This underperformance was due to the COVID-19 outbreak.
Operational Update
In the reported quarter, the company’s revenues — net of interest expenses — increased 5% year over year to $2.9 billion, driven by higher net interest income and total other income. Moreover, the top line beat the Zacks Consensus Estimate by 0.8%.
Total loans grew 5% year over year to $93 billion.
Interest expenses of $584 million decreased 7.6% year over year.
Total other expenses rose 13.2% to $1.15 billion due to higher employee compensation and benefits, marketing and business development, information processing and communications, and professional fees and other expenses.
Discover Financial Services Price, Consensus and EPS Surprise
This segment’s pre-tax loss of $161 million came in against the year-ago quarter’s pre-tax income of $879 million. This was due to higher provision of credit losses and higher operating expenses.
Total loans climbed 5% year over year to $93 billion. Credit card loans augmented 4% to $73.8 billion.
Personal loans ascended 3% while private student loans rose 4%, both on a year-over-year basis. Private student loans excluding purchased student loans also shot up 9% year over year.
Net interest income increased 4% year over year, backed by loan growth.
Net interest margin was 10.21%, down 25 basis points from the year-ago quarter.
Payment Services Segment
Payment Services pre-tax income was $83 million in the quarter under review, up 62.7% from the year-earlier period owing to a one-time gain on the sale of an equity investment.
Payment Services volume was up 5% from the prior-year period.
PULSE dollar volume expanded 4% year over year, fueled by the impact of new issuers and acquiring relationships on the network as well as strong growth from existing issuers and acquirers.
Diners Club volume declined 6.5% from the year-earlier quarter.
Network Partners volume expanded 23%, backed by AribaPay.
Strong Financial Position
Discover Financial had total assets worth $112.6 billion as of Mar 31, 2020, up 1.7% year over year.
Total liabilities as of Mar 31, 2020 were $102.9 billion, up 3.6% year over year.
Total equity was $9.6 billion on Mar 31, 2020, down 14.2% year over year.
Share Repurchase Update
During the quarter under review, the company bought back 4.7 million shares of common stock for $343 million. It suspended the buyback program in March.
Shares of common stock outstanding dipped 1.2% from the previous quarter’s level.
Zacks Rank
Discover Financial carries a Zacks Rank #4 (Sell).
Some stocks worth considering from the finance sector with a perfect mix of elements to surpass estimates in the upcoming quarterly releases are as follows:
CURO Group Holdings Corp. has an Earnings ESP of +1.47% and a Zacks Rank #1. The company is scheduled to release first-quarter earnings on May 4.
Credit Acceptance Corporation (CACC - Free Report) is set to report first-quarter earnings on May 4. The stock has a Zacks Rank #3 and an Earnings ESP of +9.53%.
Virtu Financial, Inc. (VIRT - Free Report) is slated to announce first-quarter earnings on May 7. The stock has an Earnings ESP of +41.57% and a Zacks Rank of 1.
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Discover Financial's (DFS) Q1 Earnings Miss, Tumble Y/Y
Discover Financial Services (DFS - Free Report) incurred first-quarter 2020 adjusted loss of 25 cents per share. The Zacks Consensus Estimate was of adjusted earnings of $1.36. Moreover, the bottom line came in against the year-ago quarter’s adjusted earnings of $2.15 per share. This underperformance was due to the COVID-19 outbreak.
Operational Update
In the reported quarter, the company’s revenues — net of interest expenses — increased 5% year over year to $2.9 billion, driven by higher net interest income and total other income. Moreover, the top line beat the Zacks Consensus Estimate by 0.8%.
Total loans grew 5% year over year to $93 billion.
Interest expenses of $584 million decreased 7.6% year over year.
Total other expenses rose 13.2% to $1.15 billion due to higher employee compensation and benefits, marketing and business development, information processing and communications, and professional fees and other expenses.
Discover Financial Services Price, Consensus and EPS Surprise
Discover Financial Services price-consensus-eps-surprise-chart | Discover Financial Services Quote
Segmental Update
Direct Banking Segment
This segment’s pre-tax loss of $161 million came in against the year-ago quarter’s pre-tax income of $879 million. This was due to higher provision of credit losses and higher operating expenses.
Total loans climbed 5% year over year to $93 billion. Credit card loans augmented 4% to $73.8 billion.
Personal loans ascended 3% while private student loans rose 4%, both on a year-over-year basis. Private student loans excluding purchased student loans also shot up 9% year over year.
Net interest income increased 4% year over year, backed by loan growth.
Net interest margin was 10.21%, down 25 basis points from the year-ago quarter.
Payment Services Segment
Payment Services pre-tax income was $83 million in the quarter under review, up 62.7% from the year-earlier period owing to a one-time gain on the sale of an equity investment.
Payment Services volume was up 5% from the prior-year period.
PULSE dollar volume expanded 4% year over year, fueled by the impact of new issuers and acquiring relationships on the network as well as strong growth from existing issuers and acquirers.
Diners Club volume declined 6.5% from the year-earlier quarter.
Network Partners volume expanded 23%, backed by AribaPay.
Strong Financial Position
Discover Financial had total assets worth $112.6 billion as of Mar 31, 2020, up 1.7% year over year.
Total liabilities as of Mar 31, 2020 were $102.9 billion, up 3.6% year over year.
Total equity was $9.6 billion on Mar 31, 2020, down 14.2% year over year.
Share Repurchase Update
During the quarter under review, the company bought back 4.7 million shares of common stock for $343 million. It suspended the buyback program in March.
Shares of common stock outstanding dipped 1.2% from the previous quarter’s level.
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.
Upcoming Releases From Finance Sector
Some stocks worth considering from the finance sector with a perfect mix of elements to surpass estimates in the upcoming quarterly releases are as follows:
CURO Group Holdings Corp. has an Earnings ESP of +1.47% and a Zacks Rank #1. The company is scheduled to release first-quarter earnings on May 4.
Credit Acceptance Corporation (CACC - Free Report) is set to report first-quarter earnings on May 4. The stock has a Zacks Rank #3 and an Earnings ESP of +9.53%.
Virtu Financial, Inc. (VIRT - Free Report) is slated to announce first-quarter earnings on May 7. The stock has an Earnings ESP of +41.57% and a Zacks Rank of 1.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>