Discover Financial Services Inc. (DFS) is set to report fourth-quarter 2013 results on Jan 23. Last quarter, it posted a 0.00% surprise. Let’s see how things are shaping up for this announcement.
Growth Factors this Past Quarter
Although curbing interest rates on student loans, acquisition of EMVCo. and alliance with Vietnam-based Smartlink Card Service JSC are positives that should aid Discover Financial’s earnings in the fourth quarter, higher expenses and poor performance by the Payments Service segment are negatives that might mar the results. Again, in spite of higher card sales volume, potential headwinds from the CARD Act and legal issues make us inconclusive about an earnings beat during the quarter.
Discover Financial’s earnings in the last reported quarter were in line with the Zacks Consensus Estimate and lower than the year-ago number due to the inclusion of a large reserve release in the year-ago period. However, Discover Financial posted positive earnings surprise in two out of the last four quarters, with an average beat of 11.1%.
Earnings Whispers?
Our proven model does not conclusively show that Discover Financial is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zero Zacks ESP: That is because the Most Accurate estimate and the Zacks Consensus Estimate both stand at $1.18. That is a difference of 0.00%.
Zacks Rank #3 (Hold): Discover Financial’s Zacks Rank #3 when combined with a zero ESP makes surprise prediction difficult. We caution against stocks with Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is witnessing negative or zero estimate revisions momentum.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
CNO Financial Group, Inc. (CNO), Earnings ESP of +3.33% and Zacks Rank #1 (Strong Buy).
RenaissanceRe Holdings Ltd. (RNR), Earnings ESP of +2.97% and Zacks Rank #3 (Hold).
MetLife, Inc. (MET), Earnings ESP of +0.77% and Zacks Rank #3 (Hold).
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment