NEW YORK ( TheStreet) -- Goldman Sachs on Friday upgraded its rating for Discover Financial (DFS - Get Report) to a "Buy" from a neutral rating, and upgraded the credit card sector to "Attractive" from "Neutral."
Discover on Wednesday reported net income of $624 million, or $1.18 a share, for its fiscal first quarter ended Feb. 29, increasing from $459 million, or 84 cents a share, a year earlier, and blowing past the consensus EPS estimate of 94 cents, among analysts polled by Thomson Reuters.
Discover's earnings beat was fed by a $226 million release of loan loss reserves, but the company also saw revenue net of interest expenses increases 6% year-over-year, with total loans growing 9% from a year earlier, to $56.3 billion, as of Feb. 29.
During the company's investor day presentation on Thursday, Discover's executives targeted annual earnings growth in a range of 10% to 15%, with a target return on equity of over 15%.Following the completion of this year's Federal Reserve stress tests, Discover announced a $2 billion share repurchase authorization, while leaving its quarterly dividend unchanged, at 10 cents a share. Discover's shares returned 35% year-to-date, through Thursday's close at $32.49. The shares trade for just over twice the company's reported Feb. 29 tangible book value of $15.82, and for just under nine times the consensus 20123 EPS estimate of $3.68.