Yahoo Finance Discover Financial Services Just Beat EPS By 7.0%: Here's What Analysts Think Will Happen Next
Last week, you might have seen that Discover Financial Services (NYSE:DFS) released its full-year result to the market. The early response was not positive, with shares down 2.7% to US$90.26 in the past week. Revenues fell badly short of expectations, with US$5.8b in sales missing analyst targets by 48%. Statutory earnings per share (EPS) of US$3.59 performed better, coming in 7.0% above analyst models. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Check out our latest analysis for Discover Financial Services
Taking into account the latest results, the current consensus from Discover Financial Services' 18 analysts is for revenues of US$11.5b in 2021, which would reflect a substantial 100% increase on its sales over the past 12 months. Per-share earnings are expected to jump 152% to US$9.06. In the lead-up to this report, the analysts had been modelling revenues of US$11.6b and earnings per share (EPS) of US$8.22 in 2021. Although the revenue estimates have not really changed, we can see there's been a solid gain to earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.
The consensus price target rose 8.5% to US$105, suggesting that higher earnings estimates flow through to the stock's valuation as well. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Discover Financial Services analyst has a price target of US$120 per share, while the most pessimistic values it at US$72.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing stands out from these estimates, which is that Discover Financial Services is forecast to grow faster in the future than it has in the past, with revenues expected to grow 100%. If achieved, this would be a much better result than the 0.4% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 14% per year. Not only are Discover Financial Services' revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Discover Financial Services' earnings potential next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on Discover Financial Services. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Discover Financial Services going out to 2023, and you can see them free on our platform here..
You still need to take note of risks, for example - Discover Financial Services has 3 warning signs we think you should be aware of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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