Discover Financial Services Earnings: Breaks Streak of Falling Profits, Investors Still Sell

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S&P 500 (NYSE:SPY) component Discover Financial Services (NYSE:DFS) reported its results for the fourth quarter. Discover Financial Services is a credit card issuer in the United States and an electronic payment services company.

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Discover Financial Services Earnings Cheat Sheet

Results: Net income for Discover Financial Services rose to $551 million ($1.07 per share) vs. $512.6 million (95 cents per share) in the same quarter a year earlier. This marks a rise of 7.5% from the year-earlier quarter.

Actual vs. Wall St. Expectations: Discover Financial Services fell short of the mean analyst estimate of $1.13 per share.

Quoting Management: “Our strategy and business model are working as we achieved organic growth in all of our lending products,” said David Nelms, chairman and CEO of Discover. “I am proud of our strong performance this year and our achievement of record net income, record volumes and a strong return on equity. In 2012, we established new partnerships in payments, diversified our direct banking product offerings and demonstrated our commitment to returning excess capital, which we are further emphasizing with a 40% increase in our dividend.”

Key Stats:

The company fell short of forecasts after beating estimates in the previous two quarters. In the third quarter, it topped the mark by 18 cents, and in the second quarter, it was ahead by one cent.

Last quarter’s profit increase breaks a streak of two consecutive quarters of year-over-year profit decreases. In the third quarter, net income fell 3.4% while the figure dropped in the second quarter.

Looking Forward: Expectations for the company’s next-quarter performance are higher than they were ninety days ago. Over the past three months, the average estimate for the first quarter of the next fiscal year has risen to $1.11 per share from $1. For the fiscal year, the average estimate has moved up from $4.24 a share to $4.52 over the last ninety days.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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