Discover Financial (DFS) Estimates Raised at FBR Capital Post Q1

FBR Capital analyst Scott Valentin reiterated an Outperform rating and $65 price target on Discover Financial (NYSE: DFS) following Q1 results with a better outlook for growth, NIM and credit. The firm also raised FY 2014, FY 2015 EPS

Valentin highlights: Key takeaways: (1) NIM should expand further in the near term as asset yields remain stable and the cost of funds declines further; (2) credit is expected to remain stable, resulting in reserve build only necessary to cover asset growth; and (3) management noted improved cardholder spending levels quarter to date versus 1Q14, likely reflecting better weather. We increase our FY14 EPS estimate to $5.28 (from $5.15) and increase our FY15 EPS estimate to $5.57 (from $5.43). Discover continues to post industry-leading credit card receivables growth, combined with improved NIM and stable credit, generating low-20s ROE despite being ~400 bps above management's Tier 1 common capital ratio target. Trading at 10x our FY15 EPS estimate, we view the shares as attractively valued.

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 $56.67 yesterday.

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