Discover Misses Earnings Estimates but Beats Revenue Estimates


Sep. 25 2017, Published 4:56 p.m. ET

EPS and revenue estimates

Discover Financial Services (DFS) posted earnings per share (or EPS) of $1.40 in 2Q17, which missed the analysts’ estimate of $1.45. However, the company reported revenues of $2.42 billion in 2Q17, which beat the analysts’ estimate of $2.40 billion.

Discover Financial generated total interest income of ~$2.3 billion in 2Q17 compared to ~$2.1 billion in 2Q16. Of its total interest income of ~$2.3 billion, the company generated ~$1.9 billion in interest income from its credit card business.

Discover Financial’s interest income from other loans increased in 2Q17 compared to 2Q16. In 2Q17, the company generated $379.0 million in interest income from other loans compared to $331.0 million in 2Q16.

With respect to its expenses, Discover Financial incurred $400.0 million in total interest expenses in 2Q17 compared to $339.0 million in 2Q16. This trend reflects an increase of ~18.0%. This trend was primarily due to increased interest expenses incurred on deposits and long-term borrowings.

In 2Q17, Discover Financial incurred $199.0 million in interest expenses on deposits compared to $166.0 million in 2Q16. However, the company incurred $201.0 million in interest expenses related to long-term borrowings in 2Q17 compared to $173.0 million in 2Q16.

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Efficiency ratio

Discover Financial Services (DFS) had an efficiency ratio of 37.7% on June 30, 2017. The efficiency ratios of other consumer financial players (XLF) on the same date follow:

  • Ally Financial (ALLY): 63.7%
  • PNC Financial Services Group (PNC): 61.0%
  • Regions Financial (RF): 64.6%

In this series, we’ll look at Discover’s total other expenses, net income, total interest income, and expected dividends. We’ll also look at its valuations, analysts’ ratings, and assets and liabilities.


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