We are upgrading our recommendation on Discover Financial Group (DFS) to Outperform based on its exceptional card sales volume, strong balance sheet and rapidly expanding acceptances. Steady inorganic growth is also a long-term positive.

The company's fourth quarter earnings modestly beat the Zacks Consensus Estimate on lower loan loss provisions, higher transaction and credit card sales volumes, along with record-low delinquency and charge-off rates. Higher consumer spending and merchant acceptance contributed to the substantial expansion of income across segments.

While acquisitions enhanced Discover's product portfolio, a dividend increase and share buyback also injected optimism. The company's extensive network, sound capital position and cost-containment initiatives will help accentuate growth over the long term.
 
DISCOVER FIN SV (DFS): Free Stock Analysis Report
 
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