The 2024 Q4 earnings season has entered full swing, with this week’s reporting docket stacked with many notable companies. Two financial giants, Discover Financial Services DFS and American Express AXP, are among the bunch.

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Both stocks have been big-time outperformers over the last year relative to the S&P 500, as shown below.

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The big banks already helped kick off the Q4 cycle for the broader finance sector on a positive note, with their results generally reassuring. But how do things stack up for DFS and AXP? Let’s take a closer look.

DFS' EPS Expected to Double

Analysts have shown bullishness for Discover’s quarter to be reported, with the $3.15 per share expected up 14% over the last several months and suggesting sizable growth of 100% year-over-year. As shown below, positive revisions really rolled in following the robust jobs report a bit earlier in January, brightening the outlook significantly.

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A critical metric for investors to keep an eye on in Discover’s release is net interest income, a primary driver of profitability given its core business practices. It overall provides a nice big-picture view of how it has managed its interest-earning assets.

For the quarter, the Zacks Consensus estimate for net interest income stands at $3.6 billion, 3% higher than the year-ago mark of $3.4 billion. As shown below, Discover has regularly exceeded expectations on the metric as of late, a big positive.

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The valuation picture here isn’t rich compared to the general market heading into the release, with the current 14.5X forward 12-month earnings multiple currently reflecting a 35% discount relative to the S&P 500.

The PEG ratio also works out to 1.1X, reflecting that investors are paying a fair price for the forecasted growth. The stock sports a Style Score of ‘B’ for Value.

Overall, shares have been big-time performers over the last year, and the market-beating price action looks set to continue given the company reports strong net interest income and provides favorable commentary surrounding the consumer.

AXP Keeps Reporting Record Sales

Analysts have also been similarly positive for AXP concerning EPS expectations, with the $3.03 Zacks Consensus EPS estimate up 3% over recent months and suggesting 15% year-over-year growth.

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Just like DFS, net interest income will be a critical metric to watch in the release for the same reasons. For the period, the Zacks Consensus estimate for net interest income stands at $4.1 billion, a notable 15% jump from the year-ago period.

American Express has similarly positively surprised on the metric over recent periods, falling short just once in the past six.

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It’s worth noting here that AXP’s top line has shown great strength, with Q3 sales of $16.6 billion in its latest release reflecting the 10^th consecutive period of record sales. Forecasted Q4 sales of $17.2 billion would reflect 8.8% year-over-year growth, an acceleration relative to the prior period.

Card fee revenue growth and continued customer acquisitions have helped drive the broader top line growth, which led the company to raise its FY24 EPS outlook following the above-mentioned release. Like DFS, shares stand to see continued positivity given it provides strong net interest income results and keeps scooping up new card members.

Bottom Line

With the 2024 Q4 earnings season really kicking into a high gear this week, we’ve got a slate full of notable companies on the docket, a list that includes American Express AXP and Discover Financial Services DFS.

Given their similarities, it’s reasonable to expect a shared reaction among shares, with DFS going first on January 22^nd while AXP reports on the 24^th. Both stocks have been big time outperformers over the last year, and the bullishness looks set to continue given we get favorable net interest income and broader consumer strength commentary.

Still, the big banks’ results went a long way in reassuring the broader finance sector, a key development to keep in mind.

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