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Why Discover Financial Services Could See Higher Volumes

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Oct. 9 2017, Updated 9:47 a.m. ET

Hurricanes Harvey and Irma: The impact

Discover Financial Services (DFS) could see an increase in volumes in 3Q17, mainly due to Hurricanes Harvey and Irma. According to top management, the aftermath of the hurricanes could lead to an uptrend in volumes since spending on fuel is expected to increase. However, the company’s credit business could see a marginal negative impact in 3Q17 due to the hurricanes.

Wall Street analysts expect Discover to report EPS (earnings per share) of $1.54 in 3Q17, which implies a marginal fall of 1.3% on the YoY (year-over-year) basis. Below is the expected EPS for the September 2017 quarter for other consumer financial companies (XLF):

  • Visa (V): $0.85
  • Mastercard (MA): $1.23
  • American Express (AXP): $1.47
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About the company

Discover Financial Services operates its business through two segments: Payment Services and Direct Banking. The company generates its interest income from Direct Banking. The majority of interest income is generated through credit card loans, other loans, and purchased credit-impaired loans. The company’s other loans include private student loans, personal loans, and other loans. Diners Club and PULSE are the major revenue drivers for Discover’s Payment Services segment. Diners Club contributes in the form of licensee and royalty revenues, whereas PULSE contributes in the form of transaction processing revenues.

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