Discover Financial Services Q3 Earnings: Can NYSE:DFS Hit Its $1.51 EPS Target?


Discover Financial Services (NYSE:DFS) is scheduled to report Q3 earnings results after markets close for trading on October 21, 2020.

The company is expected to report earnings of $1.51/share on revenue of $2.662 billion. The consensus earnings per share (EPS) of $1.51/share is based on a poll of 20 analysts and represents a decline in eps of −36.1% over the same quarter last year, when the company reported earnings of $2.36/share.

The revenue forecast of $2.662 billion based on a poll of 14 analysts implies a year-over-year (YoY) decline in revenue of −8.2%. Last year the company reported $2.9 billion in revenue for the quarter.

Expected to report EPS contraction of −36.1% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $2,662.48 $2,900.00 −8.2%
EPS $1.51 $2.36 −36.1%

Earnings Call Trends

Historically, management has exceeded analyst expectations 3 out of the last 8 tracked quarters, missed 3 quarters, and met expectations 2 quarters.

What are your expectations from Discover Financial Services for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 -$0.03 -$1.20 -3900% Missed
Q1, 2020 $1.76 -$0.25 −114.2% Missed
Q4, 2019 $2.24 $2.25 0.6% Beat
Q3, 2019 $2.27 $2.36 3.8% Beat
Q2, 2019 $2.11 $2.32 10.1% Beat
Q1, 2019 $2.02 $2.15 6.6% Beat
Q4, 2018 $2.06 $2.03 −1.3% Missed
Q3, 2018 $2.05 $2.05 −0.1% Missed

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by increasing 5.3%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 22, 2020 $49.01 $51.63 5.3% Increase
April 22, 2020 $34.30 $34.82 1.5% Increase
January 23, 2020 $85.34 $76.29 −10.6% Decline
October 22, 2019 $80.44 $80.52 0.1% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.53, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.53 implies a 0.6% chance of earnings manipulation.

Fundamentals And Technical Analysis

Discover Financial Services is currently trading at $64.95/share, down −0.8% for the day. The company is trading at approximately 75.2% of its 52-week high of $87.43/share. The company’s stock price is up 25.8% since the last earnings report and up 0.5% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 64.74 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.

NYSE:DFS Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 19.71 and a forward P/E multiple of 40.98.

Discover Financial Services’s current share price also implies a price-to-book (P/B) multiple of 2.32. The following table summarizes some other key fundamental ratios:

Data as of October 19, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $64.95
P/E Ratio 19.7x
P/E Ratio (Fwd) 41.0x
PEG Ratio −0.3
Total Debt / Total Capital 52.1%
Levered Free Cash Flow $5.264 billion
Free Cash Flow Yield 26.6%


Discover Financial Services is a large-cap stock with a market capitalization of $20.064 billion. The company operates in the Financials sector and the Consumer Finance industry.

Discover Financial Services, through its subsidiaries, operates as a direct banking and payment services company in the United States. It operates through two segments, Direct Banking and Payment Services. The Direct Banking segment offers Discover-branded credit cards to individuals; and other consumer products and services, including private student loans, personal loans, home equity loans, and other consumer lending, as well as deposit products, such as certificates of deposit, money market accounts, savings accounts, checking accounts, and individual retirement arrangement certificates of deposit. The Payment Services segment operates the PULSE network, an automated teller machine, debit, and electronic funds transfer network; Diners Club International, a payments network that issues Diners Club branded charge cards and provides card acceptance services; and Discover Network that processes transactions for Discover-branded credit and debit cards, as well as provides payment transaction processing and settlement services. The company was incorporated in 1960 and is based in Riverwoods, Illinois.

Expertise: financial technology, analyzing market trends. Brian is a founder at, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors. Brian can be reached at or at +1 (516) 778-6257.

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