I'm no Barbie girl, nor am I living in a material world, but that didn't stop Discover Financial Services
Life in plastic -- it's fantastic!
For those of you who thought Discover was the weakest link, think again. Discover reported a 36% jump in first-quarter profits to $1.18 from just $0.84 in the year-ago period. Although net revenue met the Street's consensus figure, Discover's $1.18 per share in profit crushed the $0.94 analysts had been looking for.
These results were fueled by positive aspects all across the board. Credit card usage increased 7%, while delinquencies hit an all-time low. The drop in delinquencies has prevented Discover from needing to set aside as much in loss reserves, which provided the huge boost to its bottom-line profits. Total loss reserves dropped 64% year over year.
And when I say all aspects of its business were strong, I really mean all aspects. The company's student loan division saw double-digit organic growth while personal loans also saw solid growth. Discover ended the year with $56.3 billion in loans, up 9% from the prior year.
I literally couldn't find one thing in this report to nitpick (and for those of you who have become familiar with me over the years, you know I'm a huge nitpicker), which goes to show just how unstoppable the credit services stocks are at the moment.
It's a party, and everyone's invited
In February, Visa
Prepaid debit card providers are getting in on the act as well. NetSpend Holdings
I truly refrain from saying that an industry is infallible, but the credit services sector looks like it might be the strongest sector in the market (Apple stockholders, please find it in your hearts to forgive me). The move toward plastic has been so strong and swift, and the rise in credit quality among its customers so pronounced, that I see no reason why Discover or these other four credit service companies wouldn't be considered a long-term buy at these levels.
Disagree with my overwhelming credit services bullishness? Tell me and your fellow Fools about it in the comments section below and consider adding these five companies to your free and personalized watchlist.
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Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He would be lost without his rewards card. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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