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Discover Financial (DFS) Q1 Earnings, Revenues Top Estimates

Zacks Equity Research

Discover Financial Services’ DFS first-quarter 2019 adjusted earnings of $2.15 per share beat the Zacks Consensus Estimate by 7.5%.Moreover, the bottom line improved 18.1% year over year on higher revenues and increased loans.

Operational Update

Revenues, net of interest expenses, increased 7.3% year over year to $2.7 billion in the quarter, driven by stronger net interest incomes, loan fee income and transaction processing revenues.The top line also trumped the Zacks Consensus Estimate by 0.6%.

Total loans grew 7% year over year to $88.7 billion.

Interest expenses of $632 million surged 34.8% year over year.

Total other expenses rose 5.7% to $1.02 billion due to higher employee compensation and benefits plus professional fees, marketing and business development as well as premises and equipment.

Discover Financial Services Price, Consensus and EPS Surprise

Discover Financial Services Price, Consensus and EPS Surprise | Discover Financial Services Quote

 

Segment Update

Direct Banking Segment


This segment’s pre-tax income rose 8.4% to $879 million owing to higher 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 $88.7 billion. Credit card loans augmented 8% to $70.8 billion.

Personal loans ascended 2% year over year.Private student loans rose 2% and were up 9% excluding purchased student loans, all on a year-over-year basis.

Net interest income increased 10% year over year, driven by loan growth and net interest margin expansion. Net interest margin was 10.46%, up 23 basis points from the year-ago quarter.

Payment Services Segment

Payment Services pre-tax income was $51 million, up 13.3% from the year-earlier period, mainly due to transaction volume growth.

Payment Services transaction dollar volume was $61 billion, up 9% from the prior-year period.

PULSE transaction dollar volume expanded 9% year over year, boosted by the impact of new issuers on the network and strong growth, courtesy of the existing issuers.

Network Partners volume expanded 24% on the back of AribaPay.

Strong Financial Position

Discover Financial had total assets worth $110.7 billion as of Mar 31, 2019, up 8.6% year over year.

Total liabilities as of Mar 31, 2019were $99.5 billion, up 9.2% year over year.

Total equity was $11.2 billion on Mar 31, 2019, up 3.6% year over year.

Share Repurchase Update

During the quarter under review, the company repurchased approximately 7.2 million shares of common stock for $487 million.

Shares of common stock outstanding dipped 1.8% from the previously reported quarter’s tally.

Zacks Rank

Discover Financial carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peer Releases From Finance Sector

Among other players from the finance sector having reported first-quarter earnings so far, the bottom-line numbers of American Express Company AXP, Synchrony Financial SYF and Nasdaq, Inc. NDAQ beat the respective Zacks Consensus Estimate.

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