The stock of Discover Financial Services (DFS) is up 2% in after hours trading after the payments company reported strong fourth-quarter 2024 financial results, including a tripling of its net income.
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The Chicago-based company announced earnings per share (EPS) $5.11, which was far ahead of the consensus forecast among analysts of $3.61. The company, which operates the online lender Discover Bank, said that its net income totaled $1.29 billion, up 253% from $366 million a year earlier.
Revenue in the period came in at $4.76 billion, which exceeded a Wall Street estimate of $4.41 billion. Discover Financial, which is also a major credit card issuer, said it benefited from a lower provision for credit losses and increased revenue.
Loan Growth
Management at Discover said the fourth quarter saw a continuation of the loan growth, margin expansion, and credit improvement that characterized 2024 at the lender. Total loans at the end of Q4 2024 stood at $121.1 billion, down 6% year-over-year. However, credit card loans, which make up the bulk of Discover’s book, rose 1% to $102.8 billion.
The company said that its net interest margin expanded to 11.96%, up 98 basis points from a year ago, benefiting from the sale of its student loan portfolio. As part of its earnings release, Discover declared a quarterly dividend of $0.70 per share, payable on March 6. There was no change to the dividend.
DFS stock has doubled (up 100%) in the past 12 months. Discover Financial Services is in the process of being acquired by Capital One Financial (COF) for $35 billion. The deal is subject to regulatory approval and a shareholder vote that’s scheduled for Feb. 18 of this year.
Is DFS Stock a Buy?
Discover Financial Services’ stock has a consensus Moderate Buy rating among nine Wall Street analysts. That rating is based on five Buy and four Hold recommendations made in the last three months. The average DFS price target of $198.33 implies 0.42% upside from current levels.
