Discover stock sinks on Q4 profit miss
Shares of Discover Financial Services (DFS) are trending down after posting their fourth-quarter earnings results, which revealed a miss on profit expectations with a net interest income decline of 62% year-over-year. While the total loan portfolio grew to $128.4 billion, a 15% increase year-over-year, it wasn't enough as the stock sank almost 9% on Thursday afternoon.
Yahoo Finance Anchors Madison Mills and Josh Lipton break down the latest developments for Discover and what it could signal for regional banks in 2024.
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Editor's note: This article was written by Nicholas Jacobino.
Video Transcript
MADISON MILLS: Discover financial services in the red today, following a big profit miss for the fourth quarter. Adjusted EPS coming in at $1.54, that's well shy of the Street's estimate that was $2.52. The big headline number here, Discover's net interest income, 62% decline year over year. If that wasn't bad enough, the forward guidance dipping over 10%, depending on the interest rate outlook.
And the interim CEO saying, and Josh that this came after some compliance issues, some c-suite shakeups. The interim CEO said we've taken steps to strengthen our risk management and compliance programs. Those steps were not enough to help the stock today.
JOSH LIPTON: Yeah, I'm just looking at, just looking through the analyst notes after the print here. What's the reaction? Some acknowledging results, listen, they say it came in weaker than expected on these higher provisions, operating expenses, the 2024 outlook, they'll know it was weaker than they were looking for.
Though, those same notes will talk about silver linings, as they put it, net interest margin expectations, perhaps conservative. They're telling their clients and maybe we'll see reinstatement share repurchases.
MADISON MILLS: Yeah.
JOSH LIPTON: Stock, though, down about 13% over the last 12 months.
MADISON MILLS: It's just been so hard for these regional banks to recover from the collapse of Silicon Valley Bank and from rate hikes that have not only impacted the larger banks, but also the smaller banks, as there's been this deposit flight. We haven't seen a lot of recovery in that space.
