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Capital One shares rise on 1Q results

LOS ANGELES (AP) -- Shares of Capital One Financial Corp. climbed Friday, after two Wall Street analysts raised their earnings outlook on the lender, citing the company's first-quarter results.

THE SPARK: Capital One reported on Thursday that its net income after paying preferred dividends fell to $1.05 billion, or $1.79 per share, in the first three months of the year. That compares with net income of $1.4 billion, or $2.72 per share, a year earlier.

The earnings beat the analysts' consensus estimate of $1.61 per share.

Revenue jumped 13 percent to $5.55 billion but was below the analysts' forecast.

THE BIG PICTURE: Capital One, based in McLean, Va., is best known for its credit card business, but it has taken steps in recent years to increase its profile as a national bank. The acquisition of ING Direct, a deal that closed in February 2012, made Capital One the nation's sixth-biggest bank, based on deposits.

In the first quarter, the company's net interest income, or money earned from loans, grew 34 percent to $4.57 billion. Non-interest income, which includes service charges and other customer-related fees, fell 35 percent to $981 million.

THE ANALYSIS: In a research note Friday, Janney Capital Markets analyst Sameer Gokhale raised his 2013 earnings per share estimate on Capital One to $6.49 from $6.29, citing the first-quarter results. He also increased his 2014 earnings per share estimate to $6.61 from $6.41.

Susquehanna Financial Group analyst James E. Friedman said the company's first-quarter results were better than expected.

"Meaningful expense reductions should enable earnings growth next year," Friedman wrote in a research note.

He raised his forecast for Capital One's 2013 earnings to $6.45 from $6.19. He also raised his revenue estimate to $22 billion from $21.6 billion.

Sterne Agee analyst Todd Hagerman highlighted Capital One's announcement that it plans to deliver a "meaningful" buyback later this year.

A call to Capital One for comment was not immediately returned.

THE SHARES: Up $3.49, or 6.6 percent, to $56.28 in afternoon trading. Since the beginning of the year, Capital One shares have declined about 3 percent.