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NII, Fee Income to Support Capital One's (COF) Q3 Earnings
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Capital One (COF - Free Report) is scheduled to report third-quarter 2023 results on Oct 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 surpassed the Zacks Consensus Estimate. Results were aided by an increase in net interest income (NII) and fee income. However, despite higher rates, the net interest margin declined year over year. Also, higher expenses, along with a significant rise in provisions, were the undermining factors.
Capital One does not have an impressive earnings surprise history. Its earnings lagged the Zacks Consensus Estimate in three of the trailing four quarters.
Capital One Financial Corporation Price and EPS Surprise
Net interest income (NII): The third quarter witnessed an overall subdued lending scenario. Nevertheless, the Zacks Consensus Estimate for COF’s third-quarter total average earning assets of $440.9 billion indicates a 7% rise from the prior-year quarter’s reported figure.
Also, Capital One’s efforts to strengthen its card operations are expected to have provided some support. This, along with higher interest rates, is expected to have positively impacted NII. The consensus estimate for NII of $7.26 billion indicates a 3.7% year-over-year improvement. Our estimate for NII is pinned at $7.25 billion.
Fee income: Capital One’s interchange fees (constituting more than 60% of fee income) are likely to have improved in the quarter. The Zacks Consensus Estimate for the same is pegged at $1.23 billion, indicating a 2.8% rise from the prior-year quarter’s reported figure. Our estimate for the metric is $1.20 billion.
The consensus estimate for service charges and other customer-related fees of $421 million implies a 1.4% increase. The Zacks Consensus Estimate for other non-interest income is pegged at $236 million, indicating a 22.9% year-over-year rise. Our estimates for service charges and other customer-related fees, and other non-interest income are $434 million and $212.3 million, respectively.
The consensus estimate for total non-interest income of $1.89 billion suggests a rise of 5.1% from the prior-year quarter’s reported figure. We expect the metric to grow to $1.85 billion.
Expenses: Capital One has been witnessing a persistent rise in expenses over the past several years because of higher marketing costs. The company’s investment in technology upgrades leads to higher costs. These, along with inflation issues, are expected to have led to an increase in operating expenses in the third quarter.
Our estimate for total non-interest expenses is pinned at $5.03 billion, implying a year-over-year increase of 1.7%.
Asset Quality: Capital One is expected to have set aside money for potential bad loans, given the global economic slowdown risks due to geopolitical and macroeconomic concerns, and tighter financial conditions.
Our estimate for provision for credit losses is pegged at $2.50 billion, indicating a 49.8% rise from the year-ago quarter figure.
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 does not 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 -3.37%.
Zacks Rank: The company currently carries a Zacks Rank #3.
The Zacks Consensus Estimate for Capital One’s third-quarter earnings of $3.23 has been revised marginally lower over the past seven days. The figure indicates a plunge of 23.1% from the prior-year quarter’s reported number. Our estimate for earnings is pinned at $3.18 per share.
The consensus estimate for sales is pegged at $9.19 billion, suggesting a year-over-year increase of 4.3%. We project the metric to be $9.10 billion, indicating growth of 3.3%.
Stocks That Warrant a Look
A couple of finance 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, are Prosperity Bancshares, Inc. (PB - Free Report) and First Citizens BancShares, Inc. (FCNCA - Free Report) .
The Earnings ESP for Prosperity Bancshares is +1.50% and it carries a Zacks Rank #3 at present. PB is slated to report third-quarter 2023 results on Oct 25.
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NII, Fee Income to Support Capital One's (COF) Q3 Earnings
Capital One (COF - Free Report) is scheduled to report third-quarter 2023 results on Oct 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 surpassed the Zacks Consensus Estimate. Results were aided by an increase in net interest income (NII) and fee income. However, despite higher rates, the net interest margin declined year over year. Also, higher expenses, along with a significant rise in provisions, were the undermining factors.
Capital One does not have an impressive earnings surprise history. Its earnings lagged the Zacks Consensus Estimate in three of the trailing four quarters.
Capital One Financial Corporation Price and EPS Surprise
Capital One Financial Corporation price-eps-surprise | Capital One Financial Corporation Quote
Key Factors & Estimates for Q3
Net interest income (NII): The third quarter witnessed an overall subdued lending scenario. Nevertheless, the Zacks Consensus Estimate for COF’s third-quarter total average earning assets of $440.9 billion indicates a 7% rise from the prior-year quarter’s reported figure.
Also, Capital One’s efforts to strengthen its card operations are expected to have provided some support. This, along with higher interest rates, is expected to have positively impacted NII. The consensus estimate for NII of $7.26 billion indicates a 3.7% year-over-year improvement. Our estimate for NII is pinned at $7.25 billion.
Fee income: Capital One’s interchange fees (constituting more than 60% of fee income) are likely to have improved in the quarter. The Zacks Consensus Estimate for the same is pegged at $1.23 billion, indicating a 2.8% rise from the prior-year quarter’s reported figure. Our estimate for the metric is $1.20 billion.
The consensus estimate for service charges and other customer-related fees of $421 million implies a 1.4% increase. The Zacks Consensus Estimate for other non-interest income is pegged at $236 million, indicating a 22.9% year-over-year rise. Our estimates for service charges and other customer-related fees, and other non-interest income are $434 million and $212.3 million, respectively.
The consensus estimate for total non-interest income of $1.89 billion suggests a rise of 5.1% from the prior-year quarter’s reported figure. We expect the metric to grow to $1.85 billion.
Expenses: Capital One has been witnessing a persistent rise in expenses over the past several years because of higher marketing costs. The company’s investment in technology upgrades leads to higher costs. These, along with inflation issues, are expected to have led to an increase in operating expenses in the third quarter.
Our estimate for total non-interest expenses is pinned at $5.03 billion, implying a year-over-year increase of 1.7%.
Asset Quality: Capital One is expected to have set aside money for potential bad loans, given the global economic slowdown risks due to geopolitical and macroeconomic concerns, and tighter financial conditions.
Our estimate for provision for credit losses is pegged at $2.50 billion, indicating a 49.8% rise from the year-ago quarter figure.
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 does not 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 -3.37%.
Zacks Rank: The company currently carries a Zacks Rank #3.
The Zacks Consensus Estimate for Capital One’s third-quarter earnings of $3.23 has been revised marginally lower over the past seven days. The figure indicates a plunge of 23.1% from the prior-year quarter’s reported number. Our estimate for earnings is pinned at $3.18 per share.
The consensus estimate for sales is pegged at $9.19 billion, suggesting a year-over-year increase of 4.3%. We project the metric to be $9.10 billion, indicating growth of 3.3%.
Stocks That Warrant a Look
A couple of finance 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, are Prosperity Bancshares, Inc. (PB - Free Report) and First Citizens BancShares, Inc. (FCNCA - Free Report) .
The Earnings ESP for Prosperity Bancshares is +1.50% and it carries a Zacks Rank #3 at present. PB is slated to report third-quarter 2023 results on Oct 25.
First Citizens is scheduled to release earnings on Oct 26. FCNCA, which carries a Zacks Rank #2 (Buy) at present, has an Earnings ESP of +3.85%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.