Overview: Discover Financial Services Issues credit cards and acquires transactions Operates a closed-loop credit card network and also uses third parties to issue its cards Extends card loans (receivables) to cardholders who wish to borrow through their credit cards Owns Diners International, a global credit card network Products: Credit cards Small business cards Student Loans
Analysts Report (Financials) Reported third-quarter net income of $642 million $1.18 per share more than double the profits reported in the prior-year quarter Total net revenue up 5% from last year Card networks continue to be a growth engine for company Volume growth in the third-party issuer segment accelerated to 11% from 7% in the previous quarter
Company News Expanding into mortgages and student loans Investing in such things, caused higher expenses Card sales volume was an all-time record of $26.3 billion in the quarter, up 9% from the prior year Total loans grew 8% from the prior year to $54.1 billion and were up 3% from the prior quarter Repurchased 8.4 million shares in the third quarter for $198 million Bought $2.5 billion of private student loans from Citigroup Inc. to expand business Expected to add $0.07 per share to 2012 earnings
“Good Company” Everyday Giveaway Sweepstakes promotion Every purchase made on a Discover card is automatically entered for a chance to win one of 150 daily prizes and a monthly prize of $25,000 Discover will match with a $25,000 donation to a public school of the winner’s choosing A grand prize of $1 million will be awarded at the end of the year.
Analyst’s Recommendation Total Number of Analysts: 13 Buy:9 Outperform:1 Hold:4 Underperform:0 Sell:0
Recommendations BUY Had a strong third quarter P/E, P/S, 3 yr. Revenue growth, Net Profit, ROE, and D/E are better than the industry 5 yr. growth forecast: 11.8% Holiday season coming up More people using their credit cards Expansion into mortgages and student loans