Analyst Raises Estimates on Discover Financial (DFS) as Legal Overhang Clears
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Price: $200.05 --0%
Rating Summary:
21 Buy, 16 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
21 Buy, 16 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Analysts at Jefferies reiterated their Buy rating on Discover Financial (NYSE: DFS) and raised their price target to $45.00 (from $40.00)
On Friday after the close, Discover announced an agreement with the CFPB & FDIC regarding credit protection products. The agreement calls for customer refunds of $200M and a fine of $14M. In July Capital One Financial (NYSE: COF) was sanctioned in a similar manner, refunding $160M to customers and paying a $60M fine. Discover had previously established a $115.9M reserve, and analysts anticipate an additional $98.1M of legal provision in the company's third fiscal quarter.
“The CFPB/FDIC ruling is non-recurring and should remove a very modest overhang,” said analyst Daniel Furtado.
“On a separate note, trends in credit recoveries and gross charge-offs lead us to conclude credit should continue to improve into at least through Q4'12,” said Furtado. “We expect recoveries on charged-off accounts to mean revert later than originally anticipated, providing slight upside to our current core EPS estimates,” he added.
Jefferies increased their core EPS estimates by $0.17 in FY'12 to $4.23 and FY'13 est $0.08 higher to $4.30.
“When combined with our outlook for continued improvement in credit, the removal of incremental legal provision in F3Q'12 results in our FY'12 GAAP estimates moving up by $0.05," he said.
For an analyst ratings summary and ratings history on Discover Financial click here. For more ratings news on Discover Financial click here.
Shares of Discover Financial closed at $38.62 yesterday.
On Friday after the close, Discover announced an agreement with the CFPB & FDIC regarding credit protection products. The agreement calls for customer refunds of $200M and a fine of $14M. In July Capital One Financial (NYSE: COF) was sanctioned in a similar manner, refunding $160M to customers and paying a $60M fine. Discover had previously established a $115.9M reserve, and analysts anticipate an additional $98.1M of legal provision in the company's third fiscal quarter.
“The CFPB/FDIC ruling is non-recurring and should remove a very modest overhang,” said analyst Daniel Furtado.
“On a separate note, trends in credit recoveries and gross charge-offs lead us to conclude credit should continue to improve into at least through Q4'12,” said Furtado. “We expect recoveries on charged-off accounts to mean revert later than originally anticipated, providing slight upside to our current core EPS estimates,” he added.
Jefferies increased their core EPS estimates by $0.17 in FY'12 to $4.23 and FY'13 est $0.08 higher to $4.30.
“When combined with our outlook for continued improvement in credit, the removal of incremental legal provision in F3Q'12 results in our FY'12 GAAP estimates moving up by $0.05," he said.
For an analyst ratings summary and ratings history on Discover Financial click here. For more ratings news on Discover Financial click here.
Shares of Discover Financial closed at $38.62 yesterday.
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