The Zacks Analyst Blog Highlights:Discover Financial Services, Wal-Mart Stores, Target, Macy's and J. C. Penney

Jan 28, 2014, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Jan. 28, 2014 /PRNewswire/ -- announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Discover Financial Services (NYSE: DFS-Free Report), Wal-Mart Stores Inc. (NYSE: WMT-Free Report), Target Corp. (NYSE: TGT-Free Report), Macy's Inc. (NYSE: M-Free Report) and J. C. Penney Co., Inc. (NYSE: JCP-Free Report).


Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Monday's Analyst Blog:

Discover Financial Upgraded to Buy

Zacks Investment Research upgraded Discover Financial Services (NYSE: DFS-Free Report) to a Zacks Rank #2 (Buy) on Jan 25, 2014.

Why the Upgrade?

Discover Financial witnessed upward estimate on the back of solid fourth -quarter 2013 results. Impressive earnings resulted in the Zacks Consensus Estimate for full-year 2014 to rise 1% to $5.12 per share, which translates into a year-over-year growth of 3.2%. Post-earnings, the Zacks Consensus Estimate for full-year 2015 also increased nearly 1% to $5.45 per share (representing a year-over-year rise of 6.5%).

Discover Financial reported fourth-quarter 2013 results on Jan 23, 2014. Operating earnings per share stood at $1.23, surpassing the Zacks Consensus Estimate by 5.1%. Results also improved 16% year over year. Loan growth and share repurchases mainly contributed to the improvement. Additionally, this financial services company delivered positive earnings surprises in 3 out of the last 4 quarters, with an average beat of 9.1%.

Discover Financial's top line also fared well on the back of loan growth and higher net interest margin in the Direct Banking segment as well as growth in card sales volume. Segment wise, the Direct Banking segment performed well while the Payments Service segment did not show signs of recovery.

Going forward, the collaboration with the FIDO (Fast IDentity Online) Alliance is expected to help the company to secure information and enhance customer satisfaction, thereby bolstering top-line growth further. Moreover, the launch of new franchises in countries like China, Russia and India, launching products like Cashback, home equity installment loans and the initiation of the FICO scores on the "Discover it" cards, strengthen the future prospects of Discover Financial. The long-term growth rate of this stock is 10.5%.

Wal-Mart to Cut Sam's Club Jobs

As per media reports, retail giant Wal-Mart Stores Inc. (NYSE: WMT-Free Report) announced that it is eliminating 2300 employees at its Sam's Club warehouse division in an effort to streamline its business structure. The job cuts have been aimed at assistant managers and some hourly workers like phone attendants.

Wal-Mart assured that the workers receiving notices will continue to get paid for the next 60 days. In the two-month time period, the workers may apply for a job at Wal-Mart or in other areas of Sam's Club operations. On failing to secure a position, they will receive severance after 60 days.

The decision to lay off employees came on the back of the company aiming to streamline management at clubs and improve operations. The company believes that rightsizing the number of managers per club in accordance with revenues earned will well-position the company for future growth.

Sam's Club pulled in $14.1 billion in sales during its third quarter fiscal 2013 ending Oct 25, up a paltry 1.1% from the prior-year quarter. Sam's Club comps grew 1.1% in the quarter as positive traffic increase was offset by a decline in average ticket. Same-store sales growth was within the guidance range of flat to 2.0%, but lower than 2.7% recorded in the prior-year quarter due to a tough retail sales environment.

The company expects the challenging sales environment and currency headwinds to continue to hurt fourth quarter fiscal 2014 results as well. For the fourth quarter of fiscal 2013, Sam's Club comps are expected to range between flat and 2%, lower than 1.8% in the prior-year quarter. However, Sam's Club remains on track to open 15 new clubs in fiscal 2014, adding to its current total of 630.

Wal-Mart is not the only retailer to cut its workforce. It follows a string of announcements from other retailers which are trimming their head count. Last week, specialty retailer Target Corp. (NYSE: TGT-Free Report) announced that it would lay off 475 employees worldwide to reduce costs. In early January, Macy's Inc. (NYSE: M-Free Report) and J. C. Penney Co., Inc. (NYSE: JCP-Free Report) also announced layoffs as part of their cost-cutting initiatives. Macy's said it would cut 2,500 employees from its U.S. workforce; J.C. Penney indicated that it would close 33 stores and remove 2,000 positions.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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