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Capital One (COF) Q3 Earnings to Gain From Rise in Consumer Loans

Capital One COF is slated to report third-quarter 2021 results on Oct 26, after market close. Both earnings and revenues are expected to have witnessed a rise on a year-over-year basis.

In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate. Results reflected an improvement in revenues, provision benefit, and a solid rise in loan balance. These were partly offset by higher expenses and legal reserve build during the quarter.

Capital One has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average beat being 92.32%.

Capital One Financial Corporation Price and EPS Surprise

Capital One Financial Corporation Price and EPS Surprise
Capital One Financial Corporation Price and EPS Surprise

Capital One Financial Corporation price-eps-surprise | Capital One Financial Corporation Quote

The Zacks Consensus Estimate for Capital One’s third-quarter earnings of $5.22 has been revised 5.5% upward over the past 30 days. The figure indicates a rise of 3.4% from the prior-year quarter’s reported number. The consensus estimate for revenues is pegged at $7.43 billion, suggesting a marginal increase of 0.7%.

Major Factors at Play

Net interest income (NII): During the third quarter, demand for consumer loans was robust as the economic growth continued at a solid pace and consumer confidence improved. The Zacks Consensus Estimate for total average earning assets of $393.2 billion indicates a marginal rise from the prior-year quarter’s reported figure.

Capital One’s efforts to strengthen its card operations along with steepening of the yield curve are expected to have provided further support to loan growth. Yet, the low interest rate environment is likely to have somewhat hurt the company’s NII. The consensus estimate for NII of $6 billion indicates a 6.1% year-over-year improvement.

Fee income: Card usage increased to some extent as consumer confidence improved during the quarter. The consensus estimate for Capital One’s total credit card purchase volumes of $129.4 billion implies a 20.9% increase. This is likely to have offered support to the company’s interchange fee (constituting more than 60% of fee income). The Zacks Consensus Estimate for the same is $977 million, indicating 26.1% growth on a year-over-year basis.

The consensus estimate for service charges and other customer-related fees (constituting almost 20% of fee income) of $370 million suggests a 15.6% increase. The Zacks Consensus Estimate for other non-interest income is pegged at $210 million indicating a plunge of 70.3%.

The consensus estimate for total non-interest income of $1.53 billion suggests a fall of 16.3% from the prior-year quarter.

Expenses: Capital One has been witnessing a persistent rise in expenses over the past several years because of higher marketing costs. Despite the company’s investment in technology upgrades, overall costs are expected to have remained manageable in the third quarter.

Asset Quality: Driven by improving macroeconomic backdrop and stable credit market conditions, Capital One is likely to have released reserves in the third quarter. This might have supported the company’s earnings in the to-be-reported quarter.

The Zacks Consensus Estimate for net charge-offs is pegged at $651 million, indicating a decrease of 39.3% year over year.

Earnings Whispers

Our proven model predicts an earnings beat for Capital One this time around. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or better — that increases the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Capital One is +4.66%.

Zacks Rank: The company currently carries a Zacks Rank #2 (Buy).

Other Finance Stocks That Warrant a Look

Here are some other finance stocks that you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases.

The Earnings ESP for Ameriprise Financial, Inc. AMP is +1.10% and it carries a Zacks Rank #2 at present. The company is slated to report quarterly numbers on Oct 26.

Prosperity Bancshares, Inc. PB is scheduled to release earnings on Oct 27. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.06%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hilltop Holdings Inc. HTH is also slated to report quarterly results on Oct 27. The company currently has an Earnings ESP of +3.31% and a Zacks Rank of 2.


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Capital One Financial Corporation (COF) : Free Stock Analysis Report

Ameriprise Financial, Inc. (AMP) : Free Stock Analysis Report

Hilltop Holdings Inc. (HTH) : Free Stock Analysis Report

Prosperity Bancshares, Inc. (PB) : Free Stock Analysis Report

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