Discover Financial (NYSE:DFS) has their focus in the right place, according to FBR Capital, but the important question is how much their marketing spend will be in growing receivables.
FBR said, "Management's continued focus on growing receivables is a positive; however, achievement of this goal will have to be weighed against how significant an increase in marketing spend is required. Management felt comfortable enough about the macro environment and its capital position to highlight capital management strategies emphasizing increasing the dividend as a priority sometime in 1H11.
"We are increasing our core FY11 EPS estimate to $2.20 (from $1.85), and we are introducing our FY12 estimate at $2.10."
FBR Capital reiterates an "Outperform" on Discover Financial, which closed Friday at $18.53, up $0.36, or 1.98 percent. FBR raised their price target on Discover from $19 to $22.
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