Can Discover Financial (DFS) Q4 Earnings Pull a Surprise?
Discover Financial Services DFS is set to report fourth-quarter and full-year 2015 earnings results on Jan 27, 2016. Last quarter, it posted a positive earnings surprise of 2.99%. Let us see how things are shaping up for this announcement.
Factors Affecting the Past Quarter
The company incurs considerable expenses to attract and retain customers, and increase card usage in an extremely competitive market. The first nine months of 2015 witnessed an increase in expenses which weighed on the company’s profits the fourth quarter is will not be spared from this either.
The company’s Payments Service segment has been suffering revenue declines over the last few quarters due to loss of volume from a large debit issuer. We do not expect the company to see any respite from this in the fourth quarter.
Also, Protection products revenues will remain low due to the continuing impact of suspending new product sales in the fourth quarter of 2012.
Other headwinds include sluggish card sales, weak loan growth, stiff competition and expenses associated with the closure of the Home Loans business, and higher technology and compliance investments.
Nevertheless, the company remains adept in its capital deployment initiatives. Increased buybacks should lower the share count and hence boost earnings per share.
Earnings Whispers
Our proven model does not conclusively show that Discover Financial is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #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 ESP of 0.00%. This is because both the Most Accurate estimate stands at $1.30 per share, in line with the Zacks Consensus Estimate.
Zacks Rank: Discover Financial has a Zacks Rank #3, which increases the predictive power of ESP. However, a 0.00% ESP makes our surprise prediction difficult.
Stocks to Consider
Here are some companies you may want to consider as these have the right combination of elements to post an earnings beat this quarter:
The Chubb Corporation CB has an Earnings ESP of +1.32% and a Zacks Rank #1. The company is scheduled to release fourth-quarter earnings results on Jan 26.
Aspen Insurance Holdings Ltd. AHL, Earnings ESP of +19.3% and a Zacks Rank #2. The company is expected to report its fourth-quarter earnings results on Feb 4.
The Hartford Financial Services Group, Inc. HIG has an Earnings ESP of +2.04% and a Zacks Rank #2. The company is scheduled to release fourth-quarter earnings results on Feb 4.
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DISCOVER FIN SV (DFS): Free Stock Analysis Report
HARTFORD FIN SV (HIG): Free Stock Analysis Report
CHUBB LTD (CB): Free Stock Analysis Report
ASPEN INS HLDGS (AHL): Free Stock Analysis Report
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