(DFS) Discover Financial Services – Bull of the Day

Discover Financial Services’ (DFS) second quarter earnings came in dramatically ahead of the Zacks Consensus Estimate, driven by lower loan loss provision, higher transaction and credit card sales volumes that also drove the loan loss reserve release growth. Higher consumer spending and merchant acceptance also contributed to the substantial expansion of income across direct banking and payment services segments.

While the SLC acquisition enhances its already strong student loan portfolio, dividend increment and share buyback further injects optimism. The company’s extensive network, sound capital position and cost containment initiatives will help accentuate growth over the long term.

Our six-month target price of $32.00 equates to 9.4x our earnings estimate for 2011. Given the expected annual cash dividend of $0.24, this price target implies an expected total return of 20.7% over that period.

DISCOVER FIN SV (DFS): Free Stock Analysis Report

Zacks Investment Research

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