Discover (DFS) beats Q3 earnings estimates

Discover (DFS) came out with quarterly earnings of $3.54 per share, beating the Zacks Consensus estimate of $3.42 per share. That compares to earnings of $2.45 per share a year ago. These figures are adjusted for one-off effects.

This quarterly report represents an earnings surprise of 3.51%. A quarter ago, this credit card issuer and lender was expected to report earnings of $3.68 per share when it actually posted earnings of $5.55 , which delivered a surprise of 50.82%.

In the past four quarters, the company has beaten consensus EPS estimates four times.

Discover, which belongs to the Zacks Financial – Consumer Loans industry, reported revenue of $2.78 billion for the quarter ended September 2021, missing Zacks’ consensus estimate by 3.89%. This compares to annual sales of US$2.71 billion. The company has beaten consensus sales estimates three times in the last four quarters.

The sustainability of the immediate price action of the stock based on recently released numbers and future earnings expectations will depend primarily on management’s comments on the earnings release.

Discover shares are up about 44.9% year-to-date, while the S&P 500 is up 20.3%.

What’s next for Discover?

Though Discover has outperformed the market so far this year, investors are left with the question: Where’s the stock going?

There are no easy answers to this key question, but one reliable metric that can help investors answer this question is the company’s earnings prospects. This includes not only the current consensus earnings expectations for the quarter(s) ahead, but also how those expectations have changed recently.

Empirical research shows a strong correlation between short-term stock movements and trends in earnings estimate revisions. Investors can track such revisions themselves or rely on a trusted rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Prior to this earnings release, the trend in estimate revisions for Discover was favorable. While the magnitude and direction of estimate revisions could change following the company’s just-released earnings report, the current status places the stock at a Zacks #2 rank (Buy). Therefore, the shares are expected to outperform the market in the near future. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks can be found here.

It will be interesting to see how the estimates for the coming quarters and the current fiscal year change over the coming days. The current consensus EPS estimate is $3.16 on sales of $2.96 billion for the upcoming quarter and $17.12 on sales of $12.08 billion for the current fiscal year.

Investors should keep in mind that the outlook for the industry can also have a material impact on the stock’s performance. In terms of the Zacks Industry Rank, Financial – Consumer Loans currently ranks in the top 24% of the 250+ Zacks Industries. Our research shows that the top 50% of industries evaluated by Zacks outperform the bottom 50% by a factor of more than 2 to 1.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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