Discover financial services (NYSE:DFS) released its latest quarterly results last week, making it a good time for investors to dive in and see if the company is performing as expected. It appears to have been an overall decent result – while revenue was slightly below analysts’ estimates at US$2.9 billion, statutory earnings beat expectations by 17%, at US$4.22 per share. Following the result, analysts have updated their earnings model, and it would be good to know if they think there has been a strong change in the company’s outlook, or if business is as it is. habit. We thought readers would find it interesting to see analysts’ latest post-earnings (statutory) forecasts for next year.
See our latest analysis for Discover Financial Services
After the latest results, the 18 analysts covering Discover Financial Services now forecast revenue of US$12.7 billion in 2022. If achieved, that would reflect a decent 9.5% improvement in sales over the last 12 month. Statutory earnings per share are expected to fall 16% to US$15.02 over the same period. Looking ahead to this report, analysts had modeled revenue of US$12.5 billion and earnings per share (EPS) of US$14.16 in 2022. So the consensus seems to have become a bit more optimistic about the profit potential of Discover Financial Services after these results.
There were no major changes to the consensus price target of US$141, suggesting that the improving earnings per share outlook is not enough to have a positive long-term impact on the valuation of the action. The consensus price target is only an average of individual analyst targets, so it might be useful to see how wide the range of the underlying estimates is. There are variations of perception on Discover Financial Services, with the most bullish analyst pricing it at US$165 and the most bearish at US$115 per share. As you can see, analysts aren’t all in agreement on the stock’s future, but the range of estimates is still reasonably narrow, which might suggest the outcome isn’t entirely unpredictable.
One way to get more context on these forecasts is to examine how they compare both to past performance and to the performance of other companies in the same industry. Analysts certainly expect Discover Financial Services’ growth to accelerate, with projected annualized growth of 13% through the end of 2022 ranking favorably alongside historic growth of 8.2% per year over the past few years. last five years. In contrast, our data suggests that other companies (with analyst coverage) in a similar industry are expected to grow revenue by 10% annually. Factoring in the projected revenue acceleration, it’s pretty clear that Discover Financial Services is expected to grow much faster than its industry.
The biggest lesson for us is the consensus rise in earnings per share, which suggests a marked improvement in sentiment around Discover Financial Services’ earnings potential next year. Fortunately, they have also reconfirmed their revenue figures, suggesting sales are in line with expectations – and our data suggests revenue is set to grow faster than the industry as a whole. There was no real change from the consensus price target, suggesting that the company’s intrinsic value has not undergone major changes with the latest estimates.
That said, the company’s long-term earnings trajectory is much more important than next year. We have forecasts for Discover Financial Services going out to 2024, and you can view them for free on our platform here.
You should always take note of the risks, for example – Discover Financial Services has 2 warning signs (and 1 that doesn’t sit well with us) we think you should be aware of.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.