(DFS) Discover Financial Services – Bull of the Day

Discover Financial Services (DFS) third-quarter earnings came in substantially ahead of the Zacks Consensus Estimate, driven by lower loan loss provision, higher transaction and credit card sales volumes, loan loss reserve release growth and record-low delinquency and charge-off rates. 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 enhanced its already strong student loan portfolio, dividend increment and share buyback further injected 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 $28.00 equates to 7.0x our earnings estimate for 2011. Given the expected annual cash dividend of $0.24, this price target implies an expected total return of 19.2% over that period.

DISCOVER FIN SV (DFS): Free Stock Analysis Report

Zacks Investment Research

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