Discover Remains "Top Pick"
Nash said that Discover Financial remained his firm's top credit card pick, reiterating his "Buy" rating for the company, while raising his price target for the shares by $4 to $50.00. For its Nash estimates that Discover will earn $4.25 a share in fiscal 2013 (which ends on Nov. 29) and $4.40 a share in 2014. The analyst raised his fiscal 2014 EPS estimate by 10 cents "to reflect better growth," and said that "our slightly below consensus 2013 and 2014 estimates merely represent our more conservative reserve building forecasts." Nash said "we see a clear path to $4.25+ of EPS, as DFS drives best-in-class balance sheet growth and legacy credit costs stay lower for longer. Given DFS' excess capital position ($2.5bn) and robust capital generation (2.7% ROA expected in 2013), we see it as well positioned to return over 100% of its earnings in 2013 via repurchases and dividends."