In This Article:
Key Takeaways
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Financial giants AXP and DFS stocks are big-time outperformers over the last year relative to the S&P 500.
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DFS shares have seen a 91.8% growth, while AXP shares have grow 70.8%; meanwhile the S&P 500 has grown 26.4%.
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Both stocks have been big time outperformers over the last year, and the bullishness looks set to continue.
The 2024 Q4 earnings season has entered full swing, with this week’s reporting docket stacked with many notable companies. Two financial giants, Discover Financial Services DFS and American Express AXP, are among the bunch.
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Both stocks have been big-time outperformers over the last year relative to the S&P 500, as shown below.
Image Source: Zacks Investment Research
The big banks already helped kick off the Q4 cycle for the broader finance sector on a positive note, with their results generally reassuring. But how do things stack up for DFS and AXP? Let’s take a closer look.
DFS' EPS Expected to Double
Analysts have shown bullishness for Discover’s quarter to be reported, with the $3.15 per share expected up 14% over the last several months and suggesting sizable growth of 100% year-over-year. As shown below, positive revisions really rolled in following the robust jobs report a bit earlier in January, brightening the outlook significantly.
Image Source: Zacks Investment Research
A critical metric for investors to keep an eye on in Discover’s release is net interest income, a primary driver of profitability given its core business practices. It overall provides a nice big-picture view of how it has managed its interest-earning assets.
For the quarter, the Zacks Consensus estimate for net interest income stands at $3.6 billion, 3% higher than the year-ago mark of $3.4 billion. As shown below, Discover has regularly exceeded expectations on the metric as of late, a big positive.
Image Source: Zacks Investment Research
The valuation picture here isn’t rich compared to the general market heading into the release, with the current 14.5X forward 12-month earnings multiple currently reflecting a 35% discount relative to the S&P 500.
The PEG ratio also works out to 1.1X, reflecting that investors are paying a fair price for the forecasted growth. The stock sports a Style Score of ‘B’ for Value.
Overall, shares have been big-time performers over the last year, and the market-beating price action looks set to continue given the company reports strong net interest income and provides favorable commentary surrounding the consumer.