Future problems in the financial sector?

JZacks financial sector has fallen more than 17% year-to-date, but still slightly outperformed the nearly 19% decline in the S&P 500.

Three stocks residing in the sector – Discover Financial Services DFS, American Express AXP and Capital One Financial Corporation COF – are all expected to report quarterly results this week.

The cumulative chart below shows the performance of the three companies’ stocks while incorporating the S&P 500.

Image source: Zacks Investment Research

With earnings season kicking off, investors are more than eager to see how companies have continued to navigate the difficult economic waters we have found ourselves in.

Let’s take a closer look at each company to see how things are doing in quarterly reports.

Discover financial services

Discover Financial Services DFS is currently a Zacks Rank #3 (Hold) with an overall VGM score of B. Over the past 60 days, the consensus estimate trend for the upcoming quarter has remained unchanged.

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Image source: Zacks Investment Research

Zacks Consensus’ EPS estimate comes in at $3.74 for the quarter to report, representing a 32% decline in quarterly earnings year over year.

The quarterly sales estimate also shows some easing; the $3.2 billion estimate marks a double-digit decline of 12% from the prior year quarter.

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Image source: Zacks Investment Research

Discover sports a low forward earnings multiple of 6.9X, well below its five-year median value of 9.2X. Additionally, the value represents a hefty 50% discount to its Zacks sector.

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Image source: Zacks Investment Research

DFS mostly reported better-than-expected net earnings, beating Zacks’ consensus EPS estimate for seven consecutive quarters. Additionally, the company posted a substantial pace of 18% in its latest quarterly report.

Capital One Financial

Capital One Financial COF is currently a Zacks Rank #3 (Hold) with an overall VGM score of a D. Over the past 60 days, analysts have mostly raised their earnings outlook for the quarter, pushing up the trend of l consensus estimate of 0.4%.

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Image source: Zacks Investment Research

Currently, Zacks’ consensus EPS estimate for the quarter stands at $5.10, reflecting a worrying 34% decline in quarterly earnings year over year.

However, the topline seems to be in good shape; the quarterly revenue estimate of $8.3 billion represents a double-digit increase of 12% over the prior year quarter.

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Image source: Zacks Investment Research

Capital One is posting a forward price-to-sales ratio of 1.3X, well below its five-year median of 1.6X and off 2021 highs of 2.7X. Additionally, the value represents an attractive discount of 83 % against its Zacks sector.

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Image source: Zacks Investment Research

The COF ensured the consistency of its net results; in its past seven quarters, the company has exceeded Zacks’ consensus EPS estimate each time. In its most recent quarter, the company beat expectations for bottom line results by a respectable 4.3%.

American Express

American Express AXP is a Zacks Rank #3 (Hold) with an overall VGM score of an A. In the past 60 days, four analysts have raised their earnings outlook for the quarter to report, but the trend in the estimate consensus slipped a marginal 1.3%.

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Image source: Zacks Investment Research

For the quarter ahead, Zacks Consensus’ EPS estimate sits at $2.36, representing a double-digit decline of 15% in quarterly earnings year-over-year.

Like COF, the company’s revenue appears to be in great shape; the quarterly sales estimate of $12.4 billion reflects a substantial 22% expansion from the year-ago quarter.

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Image source: Zacks Investment Research

AXP is posting a forward P/E ratio of 14.6X, well below its five-year median value of 15.4X and well below its 2020 high of 25.4X. Additionally, the value represents a slight 4% premium to its Zacks sector.

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Image source: Zacks Investment Research

American Express has shown remarkable consistency, exceeding earnings expectations in 18 of its 20 previous quarterly reports. The company posted a strong net profit of 12% in its most recent quarter.

Conclusion

The quarterly reports of the three companies will be watched like a hawk, and for good reason: the quarterly results will allow us to better understand consumer sentiment within the financial sector.

In addition, results for all three companies are expected to decline quite significantly year-on-year, no doubt reflecting the difficult macroeconomic environment in which we live.

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Discover Financial Services (DFS): Free Inventory Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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