Discover’s Q4 Revenue Narrowly Misses Wall Street Expectations

While Discover Financial Services reported a 78 percent increase in its fourth-quarter earnings, the company missed Wall Street expectations by 3 cents. As a result, Discover shares fell 1.2 percent in after-hours trading on Thursday (January 24), according to Seeking Alpha.

Discover reported earnings of $687 million, or $2.03 a share, compared with $387 million, or 99 cents a share. Analysts were expecting earnings of $2.06 a share.

In better news, Discover’s total revenue was $2.8 billion, which was in line with analyst expectations. The previous year, the company reported total revenue of $2.6 billion. The company’s return on equity for the fourth quarter of 2018 was 25 percent.

“Our disciplined focus on delivering profitable growth continued to drive solid operating performance and strong returns in the fourth quarter,” Roger Hochschild, CEO and president of Discover, said in a press release. “For the full year, our results were characterized by robust returns even as credit normalization continued, and our ongoing investments in technology and global merchant acceptance will enhance customer experience, scale, and overall performance. We believe these initiatives will set us up for continued growth and industry-leading returns going forward.”

The company also disclosed that total loans ended the quarter at $90.5 billion, up 7 percent compared to the previous year. Credit card loans came in at $72.9 billion, up 8 percent from the prior year, while personal loans increased $80 million, or 1 percent, from the previous year. Private student loans increased by $205 million, or 2 percent, year over year, and grew $652 million, or 9 percent, excluding student loans.

In addition, net interest income increased $181 million, or 9 percent, from the prior year, as a result of loan growth and net interest margin expansion. And other income increased $9 million, or 2 percent, from the previous year, driven by higher discount and interchange revenue.

The 30+ day delinquency rate for credit card loans came in at 2.43 percent, up 15 basis points from the previous year and 11 basis points from the prior quarter. In October, Discover, which is one the largest largest credit card issuers in the country, revealed that it was becoming more cautious in how it deals with credit limits.