Zacks_Analysts' Blog : Discover's PULSE Partners NetWorks - Analyst Blog

Yesterday, Discover Financial Services’ (DFS) subsidiary PULSE signed a long-term deal with Nebraska-based NETS Inc. (NetWorks) for ATM and debit transactions.

NetWorks is an electronic funds transfer company and provides its services to 285 financial institutions. The agreement allows NetWorks’ member institutions to use the PULSE network for PIN debit transactions at NetWorks’ point-of-sale locations across the U.S. Moreover, NetWorks’ members will be able to use PULSE’s ATMs for ATM transactions. PULSE has over 380,000 ATMs in the U.S.

On the other hand, Discover’s members, who hold the company’s PULSE, Discover or Diners Club International card, will be able to use NetWorks’ 1400 ATMs for ATM transactions using their card.

Hence, the agreement will be beneficial for clients of both Discover and NetWorks as both the parties will have access to a wider network of ATMs.

Earnings Review

Discover announced its third quarter earnings on September 22, 2011. The company reported earnings per share of $1.18, dramatically ahead of both the Zacks Consensus Estimate of 91 cents and 47 cents recorded in the year-ago quarter. Net income spiked substantially by over 148.7% year over year to $649 million from $261 million.

Additionally, Discover’s Payment Services segment revenues went up $3 million year over year, reflecting an increase in transactions and higher margin volume on the PULSE network.

The Zacks Consensus Estimate for Discover’s fourth-quarter 2011 earnings is currently 90 cents per share, up 40.6% year over year. For full year 2011, the Zacks Consensus Estimate stands at $4.00 per share, up 228.3% from 2010.

Discover competes with other financial services companies such as Capital One Financial Corp. (COF) and SLM Corp. (SLM). The company currently caries a Zacks #2 Rank, implying a Buy rating in the short term.