Discover Financial Services (NYSE: DFS) shares are trading lower Thursday after the company reported its fourth-quarter financial results. The disappointing earnings report has led to a drop in the stock price.
Discover reported fourth-quarter earnings of $1.54 per share, which fell well below analyst estimates of $2.52 per share, according to Benzinga Pro. This lower-than-expected performance has raised concerns among investors and led to a decline in the stock price.
Despite the earnings miss, Discover saw some positive growth in other areas. Total revenue net of interest expense was $4.196 billion in the quarter, up 13% year-over-year. Total loans at the end of the period were $128.4 billion, reflecting a 15% increase compared to the previous year. Additionally, the fourth-quarter total net charge-off rate came in at 4.11%.
However, the company’s Digital Banking pretax income was $458 million, down $848 million from the prior year. This decrease was attributed to a higher provision for credit losses and higher operating expenses. Payment Services pretax income totaled $54 million, representing a $17 million increase compared to the previous year, primarily driven by increased PULSE revenue.
John Owen, interim CEO and president of Discover, acknowledged the company’s performance in 2023, highlighting strong asset and deposit growth and a resilient net interest margin. He also mentioned that while net charge-offs increased, they were within the low end of their expected range. Owen expressed confidence in Discover’s ability to generate strong shareholder value in 2024 and beyond.
Discover also announced the declaration of a semi-annual cash dividend on its Series C and Series D stock. This move demonstrates the company’s commitment to returning value to its shareholders.
The disappointing earnings report and lower-than-expected performance have led to a decline in Discover’s stock price. As of the time of publication, Discover shares were down 7.12% at $101.02, according to Benzinga Pro.
Despite the setback, Discover remains optimistic about its future prospects. The company has taken steps to strengthen its risk management and compliance programs, launched new products, and announced the appointment of a new CEO. These factors, combined with its strong asset and deposit growth, position Discover to generate strong shareholder value in the coming years.
Investors will be closely watching Discover’s performance in the upcoming quarters to assess its ability to rebound from this earnings miss.
