We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Why Is Capital One (COF) Up 2.6% Since Last Earnings Report?
Read MoreHide Full Article
A month has gone by since the last earnings report for Capital One (COF - Free Report) . Shares have added about 2.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Capital One due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Capital One Posts Wider-Than-Expected Q2 Loss, Revenues Down
Capital One’s second-quarter 2020 adjusted loss of $1.61 per share was wider than the Zacks Consensus Estimate of a loss of $1.25. The year-ago quarterly earnings were $3.37 per share.
The results reflect a drastic surge in provisions amid coronavirus-related uncertainty. Also, a decline in loan balance, lower interest rates and weak consumer activity were headwinds. However, improvement in the deposit balance and robust capital ratios offered some support.
After taking into consideration non-recurring items, net loss available to common shareholders was $1.01 billion or $2.21 per share versus net income of $1.53 billion or $3.24 per share in the prior-year quarter.
Revenues & Loans Down, Expenses Stable
Total net revenues were $6.56 billion, down 8% from the prior-year quarter. The figure also missed the Zacks Consensus Estimate of $6.88 billion.
Net interest income fell 5% from the prior-year quarter to $5.46 billion. Net interest margin also fell 102 basis points (bps) to 5.78% due to lower yields on interest-earning assets.
Non-interest income of $1.10 billion decreased 20% from the prior-year quarter. Lower service charges and other customer-related fees, along with net interchange fees were the primary reasons for the decline.
Non-interest expenses of $3.77 billion were on par with the year-ago number. Rise in other costs, and salaries and associate benefit expenses were largely offset by fall in marketing costs and amortization of intangibles.
Efficiency ratio was 57.50%, up from 53.05% in the year-ago quarter. A rise in efficiency ratio indicates deterioration in profitability.
As of Jun 30, 2020, loans held for investment were $251.5 billion, down 4% from the prior quarter. Total deposits, as of the same date, increased 13% sequentially to $304.2 billion.
Credit Quality: Mixed Bag
Provision for credit losses jumped significantly on a year-over-year basis to $4.25 billion. The rise was largely due to economic uncertainty due to the coronavirus pandemic. Also, allowance — as a percentage of reported loans held for investment — was 6.69%, up 377 bps.
However, net charge-off rate decreased 10 bps year over year to 2.38%. Further, the 30-plus day performing delinquency rate declined 106 bps to 2.09%.
Capital Ratios Improve
As of Jun 30, 2020, Tier 1 risk-based capital ratio was 14.2%, up from 13.8% in the comparable prior-year period. Further, common equity Tier 1 capital ratio was 12.4% as of Jun 30, 2020, up from 12.3% in the corresponding period of 2019.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 84.16% due to these changes.
VGM Scores
At this time, Capital One has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Capital One has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Why Is Capital One (COF) Up 2.6% Since Last Earnings Report?
A month has gone by since the last earnings report for Capital One (COF - Free Report) . Shares have added about 2.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Capital One due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Capital One Posts Wider-Than-Expected Q2 Loss, Revenues Down
Capital One’s second-quarter 2020 adjusted loss of $1.61 per share was wider than the Zacks Consensus Estimate of a loss of $1.25. The year-ago quarterly earnings were $3.37 per share.
The results reflect a drastic surge in provisions amid coronavirus-related uncertainty. Also, a decline in loan balance, lower interest rates and weak consumer activity were headwinds. However, improvement in the deposit balance and robust capital ratios offered some support.
After taking into consideration non-recurring items, net loss available to common shareholders was $1.01 billion or $2.21 per share versus net income of $1.53 billion or $3.24 per share in the prior-year quarter.
Revenues & Loans Down, Expenses Stable
Total net revenues were $6.56 billion, down 8% from the prior-year quarter. The figure also missed the Zacks Consensus Estimate of $6.88 billion.
Net interest income fell 5% from the prior-year quarter to $5.46 billion. Net interest margin also fell 102 basis points (bps) to 5.78% due to lower yields on interest-earning assets.
Non-interest income of $1.10 billion decreased 20% from the prior-year quarter. Lower service charges and other customer-related fees, along with net interchange fees were the primary reasons for the decline.
Non-interest expenses of $3.77 billion were on par with the year-ago number. Rise in other costs, and salaries and associate benefit expenses were largely offset by fall in marketing costs and amortization of intangibles.
Efficiency ratio was 57.50%, up from 53.05% in the year-ago quarter. A rise in efficiency ratio indicates deterioration in profitability.
As of Jun 30, 2020, loans held for investment were $251.5 billion, down 4% from the prior quarter. Total deposits, as of the same date, increased 13% sequentially to $304.2 billion.
Credit Quality: Mixed Bag
Provision for credit losses jumped significantly on a year-over-year basis to $4.25 billion. The rise was largely due to economic uncertainty due to the coronavirus pandemic. Also, allowance — as a percentage of reported loans held for investment — was 6.69%, up 377 bps.
However, net charge-off rate decreased 10 bps year over year to 2.38%. Further, the 30-plus day performing delinquency rate declined 106 bps to 2.09%.
Capital Ratios Improve
As of Jun 30, 2020, Tier 1 risk-based capital ratio was 14.2%, up from 13.8% in the comparable prior-year period. Further, common equity Tier 1 capital ratio was 12.4% as of Jun 30, 2020, up from 12.3% in the corresponding period of 2019.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 84.16% due to these changes.
VGM Scores
At this time, Capital One has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Capital One has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.