How Will Discover Financial Services Stock React To Its Upcoming Earnings?

Discover Financial Services (NYSE:DFS) is set to report its earnings on Thursday, April 24, 2025. Earnings are likely to come in at $3.30 per share, per consensus estimates, up from a little over $1 per share last year, while revenues are expected to remain roughly flat at $4.21 billion. The company is likely to see some strength in its net interest margins following the sale of its student loan portfolio last year, with a shift toward more higher-yielding credit card balances. Moreover, growth in personal loans should also help to an extent. Discover stock has declined by about 10% year-to-date due to broader turmoil in the markets following trade tensions and also due to some uncertainty relating to regulatory approvals regarding Discover’s acquisition by Capital One (NYSE: COF), related: Where does Capital One-Discover Deal stand?

Discover has about $39 Bil in current market capitalization. Revenue over the last twelve months was $18 Bil, and net income of $4.5 billion. That said, if you seek upside with lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.

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Discover Financial Services’ Historical Odds Of Positive Post-Earnings Return

Some observations on one-day (1D) post-earnings returns:

• There are 20 earnings data points recorded over the last five years, with 8 positive and 12 negative one-day (1D) returns observed. In summary, positive 1D returns were seen about 40% of the time.
• Notably, this percentage increases to 42% if we consider data for the last 3 years instead of 5.
• Median of the 8 positive returns = 2.8%, and median of the 12 negative returns = -3.5%

Additional data for observed 5-Day (5D), and 21-Day (21D) returns post earnings are summarized along with the statistics in the table below.

Correlation Between 1D, 5D, and 21D Historical Returns

A relatively less risky strategy (though not useful if the correlation is low) is to understand the correlation between short-term and medium-term returns post-earnings, find a pair that has the highest correlation, and execute the appropriate trade. For example, if 1D and 5D show the highest correlation, a trader can position themselves “long” for the next 5 days if the 1D post-earnings return is positive. Here is some correlation data based on a 5-year and 3-year (more recent) history. Note that the correlation 1D_5D refers to the correlation between 1D post-earnings returns and subsequent 5D returns.

Is There Any Correlation With Peer Earnings?

Sometimes, peer performance can have an influence on post-earnings stock reaction. In fact, the pricing-in might begin before the earnings are announced. Here is some historical data on the past post-earnings performance of Discover Financial Services stock compared with the stock performance of peers that reported earnings just before Discover Financial Services. For fair comparison, peer stock returns also represent post-earnings one-day (1D) returns.

Learn more about Trefis RV strategy that has outperformed its all-cap stocks benchmark (combination of all 3, the S&P 500, S&P mid-cap, and Russell 2000), to produce strong returns for investors. Separately, if you want upside with a smoother ride than an individual stock like Discover Financial Services, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

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