Why Discover Stock Is Tumbling Thursday

Discover Financial Services DFS shares are trading lower Thursday after the company reported worse-than-expected quarterly results.

What Happened: Discover said second-quarter revenue increased 21% year-over-year to $3.878 billion versus average analyst estimates of $3.8 billion. The company reported quarterly earnings of $3.54 per share versus estimates of $3.67 per share, according to Benzinga Pro.

Discover said it ended the quarter with $117.9 billion in total loans versus $99.3 billion in the same quarter last year, representing loan growth of 19% year-over-year. 

Digital banking revenue came in at $1.1 billion, down $322 million from the prior year. Payment services volume was up 8% year-over-year, and payment services income totaled $70 million, up from $20 million in the prior year. 

"This quarter again showed the strength of Discover's business model, as revenue growth offset the impact of normalizing charge-offs, and our deposit base grew another 4%. We are also seeing positive early results from the relaunch of our cash back debit product, an important strategic milestone," said Roger Hochschild, president and CEO of Discover.

During the second quarter, Discover repurchased approximately 6.8 million shares for $700 million. The company's board also declared a quarterly cash dividend of 70 cents per share, payable on Sept. 7 to shareholders as of Aug. 24. 

Following the print, Stephens & Co. analyst Vincent Caintic reiterated Discover with an Equal-Weight rating and maintained a $124 price target.

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DFS Price Action: Discover shares were down 14% at $104.81 at the time of publication, according to Benzinga Pro.

Photo: courtesy of Discover.