Analysis of Discover Financial Services’ (NYSE: DFS) Earnings Release

Discover, Financials, UBS, HSBCCredit card provider, Discover Financial Services (NYSE: DFS) is set to release its 4th quarter earnings today, Thursday January 23rd. Positive sentiment is surrounding Discover as it gets ready to round off its 2013 numbers.

Discover had a strong 2013, shares rose from around $38 per share in late January to its current price of around $53. The company’s stock price was buoyed by a succession of strong earnings results. Discover posted $1.20 per diluted share in quarter three 2013, which was preceded by an identical earnings number in the second quarter, and a gain of $1.33 in first quarter. The earnings consensus for quarter four has come in at $1.18 per diluted share, a bit below the average of the first three quarters of 2013. A number of banks have commented on the stock price, with a generally positive outlook and a mix of “buy” and “neutral” ratings.

Analyst Opinion Highlights:

    Logo, Financial Buzz, News, Finance Guggenheim – price target raised from $62.00 to $66.00

    Logo, Financial Buzz, News, Finance UBS AG (NYSE: UBS) – rating: “neutral” | price target: $56.00

    Logo, Financial Buzz, News, Finance Barclays PLC (NYSE: BCS) – price target lowered from $63.00 to $59.00

Consensus: 5 “hold” ratings | 15 “buy” ratings | price target: $56.52

Price targets are coming in above the current stock price in the mid-$53 range and topping off in the low $60s.

The release of 4th quarter results could shoot the stock higher, though a surge in a few days is more likely, 1) increased use of credit cards by members in 2013, likely to have continued in quarter four 2) price targets are above the current stock price 3) Discover supports the most loyal credit card users in the country, according to the Brand Keys Customer Loyalty Engagement Index, lowering the chances of a surprise loss – in fact Discover beats its estimates by an average of 11.1% over the past four quarters.

Discover’s long term potential is strong, it released a number of new high-rewards credit cards in 2013, including the “it” card. It is constantly increasing its share of the student loan and residential loan markets, and keeps its revenue on an upward slope.

Earnings for Discover Financial Services Quarter 4 to be Released After Market Close on Thursday January 23rd, 2014.

 

 

Disclaimer: I do not hold any Discover Financial Services (NYSE: DFS) stock, and do not plan to for at least 72 hours. This is solely my opinion.

 

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