Can Discover Financial Beat Q1 Earnings on PULSE Strength?

Leading digital banking and payment service provider Discover Financial Services DFS is set to report its first-quarter 2025 results on April 23, after the closing bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at $3.32 per share on revenues of $4.21 billion. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

The first-quarter earnings estimate has been constant over the past week. The bottom-line projection indicates a year-over-year increase of 201.8%. The Zacks Consensus Estimate for quarterly revenues suggests a marginal year-over-year decline.

For the current year, the Zacks Consensus Estimate for Discover Financial’s revenues is pegged at $17.32 billion, implying a fall of 3.6% year over year. Also, the consensus mark for current-year EPS is pegged at $13.79, calling for a fall of around 22.2% on a year-over-year basis.

DFS beat the consensus estimate for earnings in three of the last four quarters and missed once, with the average surprise being 27.2%.

Discover Financial Services Price and EPS Surprise

Discover Financial Services price-eps-surprise | Discover Financial Services Quote

Q1 Earnings Whispers for DFS

Our proven model predicts an earnings beat for the company this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.

DFS has an Earnings ESP of +2.53% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

What’s Shaping DFS’ Q1 Results?

Discover Financial's revenue growth in the first quarter is expected to have been supported by PULSE Network volume. PULSE Network is likely to have benefited from growth in transaction fees charged and the debit network. The Zacks Consensus Estimate for the PLUSE network stands at $85.7 billion, suggesting an 8.4% year-over-year increase, while our estimate is pegged at above $90 billion.

The Zacks Consensus Estimate for non-interest income is pegged at $691.6 million, marking a 2.8% year-over-year increase, while our estimate stands at around $708 million.

The factors mentioned above are expected to have contributed to the company's year-over-year growth, positioning it for an earnings beat. However, the upsides are likely to have been partially offset by increased expenses from customer rewards costs.

Our model suggests that the total operating expenses in the first quarter may rise 15.2%, attributed to increased costs related to higher compensation and benefits and other operating costs. 

Other Stocks That Warrant a Look

Here are some other companies worth considering from the broader Finance space, as our model shows that these, too, have the right combination of elements to beat on earnings this time:

Cboe Global Markets Inc. CBOE has an Earnings ESP of +3.62% and is a Zacks #2 Ranked player. 
The Zacks Consensus Estimate for Cboe’s bottom line for the to-be-reported quarter is pegged at $2.29 per share, indicating 6.5% year-over-year growth. Cboe beat earnings estimates in three of the past four quarters and missed once, with the average surprise being 1.8%. The consensus estimate for Cboe’s revenues is pegged at $546.5 million.

Synchrony Financial SYF has an Earnings ESP of +1.29% and a Zacks Rank of 3. 

The Zacks Consensus Estimate for Synchrony’s earnings for the to-be-reported quarter is pegged at $1.66 per share. The consensus estimate for revenues is pegged at $4.55 billion. Synchrony beat earnings estimates in three of the past four quarters and missed once, with the average surprise being 2.77%.

Capital Southwest Corp CSWC has an Earnings ESP of +3.23% and a Zacks Rank of 3. 

The Zacks Consensus Estimate for Capital Southwest’s earnings for the to-be-reported quarter is pegged at 62 cents. It has remained stable over the past week. The consensus estimate for revenues is pegged at $53.7 billion.
 

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This article originally published on Zacks Investment Research (zacks.com).

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