Visa (V), which competes with American Express (AXP), Discover Financial Services (DFS), and MasterCard (MA), is probably one of the best long-term ideas out there, in my opinion. Credit and debit cards will always play a vital role in the financial culture, and Visa is a top brand in the space.

The equity's 52-week high stands at $97.19. It closed yesterday at $93.61, up a paltry 66 cents, or 0.7%. The stock wasn't rocking into the earnings report, which was released after the bell. And it's pulled back a little from the 52-week high. So what? The one-year chart looks attractive to my eye, and even if it didn't, this is one story I'm fully behind.

Continue reading Visa Performs Well in Q2: Good Long-Term Play?

Visa Performs Well in Q2: Good Long-Term Play? originally appeared on BloggingStocks on Thu, 29 Apr 2010 09:00:00 EST. Please see our terms for use of feeds.

Discover Financial Services (DFS) issued its fiscal first quarter report Tuesday after the bell. According to an article at BusinessWeek.com, a net loss of 22 cents per share was recorded. Last year at this time, the card entity, which counts American Express (AXP) as a colleague, brought in 25 cents per share of positive income.

The quarter's red ink was driven by an addition to loan loss reserves. Without that aspect, Reuters says that Discover brought in a profit of 11 cents per share. Unfortunately, that won't help the company win the expectations game. The estimate at Earnings.com indicates a desired figure of 12 cents for the bottom line.

Continue reading Discover Financial Services Books a Loss in Q1

Discover Financial Services Books a Loss in Q1 originally appeared on BloggingStocks on Wed, 17 Mar 2010 09:00:00 EST. Please see our terms for use of feeds.

Visa (V), a credit card company that competes with American Express (AXP), Discover Financial Services (DFS), and MasterCard (MA), is looking good after the Q1 report, which was released to the market after the bell on Wednesday. GAAP net operating revenue went up 13%. Net income was $1.02 per Class A share, representing a 38% year-over-year increase. According to TheStreet.com, the expectation was for 91 cents.

I simply love this business model. We're a society that is addicted to using credit and debit cards, and Visa takes a little percentage of each transaction. So far, the model is working like a charm. Visa expects prosperous growth in the future, plus a whole lot of free cash flow.

Continue reading Visa's Long-Term Story Remains Valid After Q1

Visa's Long-Term Story Remains Valid After Q1 originally appeared on BloggingStocks on Thu, 04 Feb 2010 09:30:00 EST. Please see our terms for use of feeds.

I've said on many occasions that I prefer MasterCard (NYSE: MA) to Visa (NYSE: V). No, I don't mean the card products themselves. I mean the stocks. I believe Visa has better brand equity associated with it, and I think it possesses a little more depth and fundamental prowess. However, both of these companies operate on the same basic economic model: collect fees on transactions, and don't take on loan risk. So, both MasterCard and Visa do offer compelling long-term investment theses.

And, even though there were some negative outlooks on MasterCard's latest earnings report, which was released Tuesday, I have to say that I didn't find the situation too disturbing. Revenues increased only 2%. The top line was inhibited by currency effects, but it's not like we haven't heard that story before. More importantly, MasterCard posted adjusted income of $3.48 per share, representative of a 40% increase over the adjusted income recorded a year ago.

Continue reading Was MasterCard's Q3 good or bad?

Was MasterCard's Q3 good or bad? originally appeared on BloggingStocks on Wed, 04 Nov 2009 08:20:00 EST. Please see our terms for use of feeds.

Visa (NYSE: V) is one of my favorite businesses on Wall Street. It should be an excellent long-term investment. People will always use branded credit cards, and Visa doesn't take a lot of risk. It simply collects a little of the spoils on each transaction. What a model!

According to TheStreet.com, Visa increased top-line sales by 10% in the fourth quarter, and expanded per-share profit by 28% to 74 cents, excluding certain items. Forecasts were for 72 cents per share.

Continue reading Visa charges through Q4 estimates, but future cash flow is the story

Visa charges through Q4 estimates, but future cash flow is the story originally appeared on BloggingStocks on Wed, 28 Oct 2009 08:30:00 EST. Please see our terms for use of feeds.

Discover Financial Services (NYSE: DFS), a credit card company that competes with Visa (NYSE: V), MasterCard (NYSE: MA), and American Express (NYSE: AXP), released earnings for the third quarter on Thursday. The company put analysts to shame by posting a profit instead of a loss according to an article from Reuters.

The projection was for a loss of 12 cents per share. Discover actually made 52 cents per share of profit, once you exclude monies received from an antitrust settlement. Wow, that's what you call being way off the mark! The disparity surprised me, so I went to our very own earnings preview to see what we were reporting for an estimate. Sure enough, it stated the exact same expectation for a loss of 12 cents.

Continue reading Discover surprises analysts in Q3

Discover surprises analysts in Q3 originally appeared on BloggingStocks on Thu, 17 Sep 2009 15:00:00 EST. Please see our terms for use of feeds.

American Express Company (NYSE: AXP), a company that competes with Visa Inc. (NYSE: V), MasterCard Incorporated (NYSE: MA), and Discover Financial Services (NYSE: DFS), issued Q2 results earlier in the week. Earnings from continuing operations dropped very steeply to 9 cents per share. How steeply? Well, the per-share profit lost 84% of its value this time around. However, it might make you feel a little better to know that 18 cents can be added back, since that was the net worth of repurchase activity relating to preferred shares from the U.S. Treasury department. Therefore, American Express took in 27 cents per share from continuing activities. According to this Reuters piece, that number met expectations.

The Reuters article also points out that revenues fell by 18% and that net charge-offs increased. Not a great picture. Reading through the press release, an investor might come away with a feeling of dread. Management mentions the not-so-strong spending by its cardmembers and the fact that loan losses are at historic levels.

Continue reading American Express not on my watch list after second-quarter data

American Express not on my watch list after second-quarter data originally appeared on BloggingStocks on Fri, 24 Jul 2009 18:00:00 EST. Please see our terms for use of feeds.

If you read the actual press release, you'll see that Discover, on a reported basis, made $0.43 per share. However, we must remember that this profit included an antitrust settlement sourced to Visa and MasterCard. So, once you get rid of that money, you come up with a loss for the quarter.

Continue reading Discover Financial Services beats in Q2 -- buy the stock?

Discover Financial Services beats in Q2 -- buy the stock? originally appeared on BloggingStocks on Thu, 18 Jun 2009 13:50:00 EST. Please see our terms for use of feeds.

Visa (NYSE: V), whose colleagues include American Express (NYSE: AXP), MasterCard (NYSE: MA), and Discover Financial Services (NYSE: DFS), reported a Q2 profit on Wednesday that was surprisingly strong. On an adjusted basis, earnings came in at 73 cents per share. Analysts were banking on only 64 cents per share, according to Reuters.

Quite frankly, I can see the disparity between Wall Street's thinking and the ultimate reality. I mean, the economy has been bad (to state the obvious), and people aren't spending as much. This means that they aren't using their credit cards like they used to. Ergo, you might expect Visa to post a lower number.

Continue reading Let's give Visa some credit for its Q2 performance

Let's give Visa some credit for its Q2 performance originally appeared on BloggingStocks on Thu, 30 Apr 2009 09:30:00 EST. Please see our terms for use of feeds.

Discover (DFS) to receive bailout funds originally appeared on BloggingStocks on Fri, 16 Jan 2009 12:48:00 EST. Please see our terms for use of feeds.

I'm not the biggest fan of Discover Financial Services (NYSE: DFS), the credit-card company that competes with MasterCard (NYSE: MA), Visa, Inc. (NYSE: V), and American Express (NYSE: AXP). I currently like Visa the best. Why? I like the brand, I like the fact that it doesn't have direct exposure to loans, and I think there's a lot of upside left to its stock price on a long-term basis (granted, the stock hasn't been strong lately). Nevertheless, I have to wonder if there might be trade potential with Discover's stock.

It's not so much the Q4 earnings. Net income from continuing operations more than doubled to $0.92 per share, something that looks great on the surface. It was helped along, however, by settlement proceeds relating to antitrust complaints against Visa and MasterCard. Not only that, but when you take a look at the consumer-confidence landscape, you'll see that it's pretty dreadful. It doesn't take too much thinking to realize that spending will be down and bad loans most likely will be up going forward. This doesn't benefit Discover. But, according to this article, government help does. Management wants access to some of the monies available in the now-famous federal rescue package. Bank-holding status, if Discover gets it, will do the trick.

This is why I see some trade potential with the stock. It rose the other day on the news, and as I am writing this now, the stock is up another 3%. If one was to play around with Discover, one should only do so temporarily, in my opinion. I think, on a longer-term basis, that either Visa or MasterCard are much better options for investing in the eventual consumer rebound (whenever that decides to happen, of course). Again, all you have to do is remember that Discover has more on the line in terms of charge-offs and loan provisions. Yes, the government can help out Discover's situation, and that will be valuable, but I still wouldn't want the company as a core member of my portfolio.

Disclosure: I don't own any company mentioned; positions can change at any time.

Discover Financial Services: Is it a buy? originally appeared on BloggingStocks on Fri, 19 Dec 2008 16:23:00 EST. Please see our terms for use of feeds.

Credit-card concerns Visa, Inc. (NYSE: V) and MasterCard, Inc. (NYSE: MA) will be shelling out up to $2.75 billion to settle an antitrust suit with Discover Financial Services (NYSE: DFS). Specifically, MasterCard will pay Discover $862.5 million in the fourth quarter, while Visa will fork over $1.89 billion over the course of 2009. Following the release of the settlement's details, an analyst at Keefe, Bruyette & Woods is weighing in favorably on all three firms.

Sanjay Sakhrani called the news "a big win for Discover, as it provides an additional cushion to contend with the implications of a weaker U.S. economy." He expects the payments will add about $1.75 to Discover's earnings per share. However, he also cited the report as an upside catalyst for MasterCard and Visa, as it eliminates an overhang on shares of both companies -- an assertion supported by analyst Julio C. Quinteros, Jr., of Goldman Sachs.

Unfortunately, though, it's not all sunshine and rainbows in the credit-card group today. Morgan Stanley (NYSE: MS) has filed its own suit against Discover in New York State Supreme Court, alleging that it's entitled to a chunk of the $2.75-billion settlement. DFS was spun off from Morgan Stanley last year, and the latter company claims that it should receive a portion of the award under the terms of a special dividend agreement.

Not so fast, says Discover, which alleges that its parent company is in violation of their spinoff agreement, and "the amount of Morgan Stanley's special dividend is a matter of dispute." Morgan fired back that "there is absolutely no basis for Discover's claim that the agreement was breached." Stay tuned to see how this credit-card drama plays out -- in early trading, shares of all three credit card companies were higher.

Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.

Visa, MasterCard settle with Discover, but what about Morgan Stanley? originally appeared on BloggingStocks on Tue, 28 Oct 2008 11:11:00 EST. Please see our terms for use of feeds.

As seen with the Visa (NYSE: V) IPO this week, there's definitely interest in the credit card industry.

However, not all companies are benefiting. For example, take a look at Discover Financial Services (NYSE: DFS), which became a public company in June. Since then, the stock has gone from $32 to $15.20.

Well, this week Discover announced its fiscal Q1 results. With the weak economy, it's no surprise that the company is feeling the pain and earnings plunged 65% to $81.2 million, or $0.17 per share.

While a chunk of this came from the unloading of its UK division (called Goldfish), the good news is that the transaction should help free up capital and provide more focus. This will certainly be critical in dealing with the inevitable charge-offs and delinquencies. Keep in mind that Discover set aside $305.6 million for credit losses.

Yet, investors are still showing caution. In yesterday's trading, Discover's stock fell 12%.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

Discover Financial: Investors decline originally appeared on BloggingStocks on Thu, 20 Mar 2008 09:55:00 EST. Please see our terms for use of feeds.