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What's in Store for Capital One (COF) This Earnings Season?

Capital One COF is slated to report first-quarter 2022 results on Apr 26, after market close. While quarterly earnings are expected to have witnessed a fall on a year-over-year basis, revenues are likely to have risen.

In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate. Results reflected an improvement in the top line and a solid rise in loan balance. These were partly offset by higher expenses and an increase in provisions 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 41.64%.

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

Major Factors at Play

Net interest income (NII): During the first 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 $393.7 billion indicates a 1.3% rise from the prior-year quarter’s reported figure.

Capital One’s efforts to strengthen its card operations 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 $6.43 billion indicates a 10.5% 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 $130.4 billion implies a 20.4% rise. 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 $974, indicating 19.2% 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 $374 million suggests a 6.3% increase. The Zacks Consensus Estimate for other non-interest income is pegged at $236 million, indicating a jump of 100%.

The consensus estimate for total non-interest income of $1.6 billion suggests a rise of 23.9% 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. Also, the company’s investment in technology upgrades leads to higher costs. These, along with rising inflation, are expected to have resulted in an increase in operating expenses in the first quarter.

Asset Quality: With the rise in loan balance and expectations of economic slowdown due to geopolitical and inflation concerns, Capital One is expected to have built reserves in the first quarter. Thus, the company’s provision for credit losses is likely to have risen in the quarter under review.

The Zacks Consensus Estimate for net charge-offs is pegged at $809 million, indicating a rise of 9.3% year over year.

Earnings Whispers

According to our quantitative model, the chances of Capital One beating the Zacks Consensus Estimate this time are low. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher.

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 -1.04%.

Zacks Rank: The company currently carries a Zacks Rank #3.

The Zacks Consensus Estimate for Capital One’s first-quarter earnings of $5.39 has been revised 1.1% lower over the past 30 days. The figure indicates a decline of 23.3% from the prior-year quarter’s reported number.

The consensus estimate for sales is pegged at $8.02 billion, suggesting an increase of 12.7%.

Bank Stocks That Warrant a Look

Here are a couple of bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:

Prosperity Bancshares, Inc. PB is slated to report quarterly earnings on Apr 27. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +0.50%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PB’s earnings estimates for the to-be-reported quarter have remained unchanged over the 30 days.

SouthState Corporation SSB is scheduled to report quarterly earnings on Apr 28. The company, which carries a Zacks Rank #2 (Buy) at present, has an Earnings ESP of +1.97%.

SSB’s earnings estimates for the to-be-reported quarter have moved 4.8% north over the 30 days.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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

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

SouthState Corp. (SSB) : Free Stock Analysis Report

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