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Higher Rates Likely to Support Capital One (COF) in Q4 Earnings
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Capital One (COF - Free Report) is scheduled to report fourth-quarter and 2023 results on Jan 25, 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 lower expenses. Further, higher fee income on the back of a robust credit card performance offered support. However, the net interest margin declined year over year due to the rise in deposit costs. Also, higher provisions were the undermining factor.
Capital One does not have an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in only two of the trailing four quarters.
Capital One Financial Corporation Price and EPS Surprise
Net interest income (NII): Loan growth was subdued in the fourth quarter. Nevertheless, the Zacks Consensus Estimate for COF’s fourth-quarter total average earning assets of $448.5 billion indicates a 6.5% rise from the prior-year quarter’s reported figure.
While the Federal Reserve paused rate hikes in the quarter, interest rates remained at a 22-year high of 5.25-5.5%.
Thus, despite not-so-impressive loan growth and higher funding costs, COF’s NII is expected to have been positively impacted in the quarter by higher rates. Also, Capital One’s efforts to strengthen its card operations are expected to have provided some support. The consensus estimate for NII of $7.55 billion indicates a 4.9% 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 $1.28 billion, indicating an 8.6% rise from the prior-year quarter’s reported figure. Our estimate for the metric is $1.25 billion.
The consensus estimate for service charges and other customer-related fees of $436 million implies a 10.4% increase. The Zacks Consensus Estimate for other non-interest income is pegged at $211 million, indicating a 22.1% year-over-year decline. Our estimates for service charges and other customer-related fees, and other non-interest income are $497.8 million and $262.9 million, respectively.
The consensus estimate for total non-interest income of $1.94 billion suggests a rise of 5% from the prior-year quarter’s reported figure. We expect the metric to grow to $2.01 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 fourth quarter.
Our estimate for total non-interest expenses is pinned at $5.57 billion, implying a year-over-year increase of 9.6%.
The company expects fourth-quarter 2023 marketing costs to be seasonally higher.
Asset Quality: Capital One is expected to have set aside money for potential bad loans, given the risks due to geopolitical and macroeconomic concerns.
Our estimate for provision for credit losses is pegged at $2.60 billion, indicating a 7.8% rise from the year-ago quarter’s reported 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 -2.23%.
Zacks Rank: The company currently carries a Zacks Rank #3.
The Zacks Consensus Estimate for Capital One’s fourth-quarter earnings of $2.50 has been revised marginally lower over the past seven days. The figure indicates a plunge of 11.4% from the prior-year quarter’s reported number. Our estimate for earnings is pinned at $2.11 per share.
The consensus estimate for sales is pegged at $9.45 billion, suggesting a year-over-year increase of 4.6%. We project the metric to be $9.26 billion, indicating growth of 2.4%.
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 T. Rowe Price Group, Inc. (TROW - Free Report) and Principal Financial Group, Inc. (PFG - Free Report) .
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Higher Rates Likely to Support Capital One (COF) in Q4 Earnings
Capital One (COF - Free Report) is scheduled to report fourth-quarter and 2023 results on Jan 25, 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 lower expenses. Further, higher fee income on the back of a robust credit card performance offered support. However, the net interest margin declined year over year due to the rise in deposit costs. Also, higher provisions were the undermining factor.
Capital One does not have an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in only two 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 Q4
Net interest income (NII): Loan growth was subdued in the fourth quarter. Nevertheless, the Zacks Consensus Estimate for COF’s fourth-quarter total average earning assets of $448.5 billion indicates a 6.5% rise from the prior-year quarter’s reported figure.
While the Federal Reserve paused rate hikes in the quarter, interest rates remained at a 22-year high of 5.25-5.5%.
Thus, despite not-so-impressive loan growth and higher funding costs, COF’s NII is expected to have been positively impacted in the quarter by higher rates. Also, Capital One’s efforts to strengthen its card operations are expected to have provided some support. The consensus estimate for NII of $7.55 billion indicates a 4.9% 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 $1.28 billion, indicating an 8.6% rise from the prior-year quarter’s reported figure. Our estimate for the metric is $1.25 billion.
The consensus estimate for service charges and other customer-related fees of $436 million implies a 10.4% increase. The Zacks Consensus Estimate for other non-interest income is pegged at $211 million, indicating a 22.1% year-over-year decline. Our estimates for service charges and other customer-related fees, and other non-interest income are $497.8 million and $262.9 million, respectively.
The consensus estimate for total non-interest income of $1.94 billion suggests a rise of 5% from the prior-year quarter’s reported figure. We expect the metric to grow to $2.01 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 fourth quarter.
Our estimate for total non-interest expenses is pinned at $5.57 billion, implying a year-over-year increase of 9.6%.
The company expects fourth-quarter 2023 marketing costs to be seasonally higher.
Asset Quality: Capital One is expected to have set aside money for potential bad loans, given the risks due to geopolitical and macroeconomic concerns.
Our estimate for provision for credit losses is pegged at $2.60 billion, indicating a 7.8% rise from the year-ago quarter’s reported 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 -2.23%.
Zacks Rank: The company currently carries a Zacks Rank #3.
The Zacks Consensus Estimate for Capital One’s fourth-quarter earnings of $2.50 has been revised marginally lower over the past seven days. The figure indicates a plunge of 11.4% from the prior-year quarter’s reported number. Our estimate for earnings is pinned at $2.11 per share.
The consensus estimate for sales is pegged at $9.45 billion, suggesting a year-over-year increase of 4.6%. We project the metric to be $9.26 billion, indicating growth of 2.4%.
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 T. Rowe Price Group, Inc. (TROW - Free Report) and Principal Financial Group, Inc. (PFG - Free Report) .
TROW is expected to report fourth-quarter and 2023 results on Feb 8. It has an Earnings ESP of +1.33% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Over the past seven days, the Zacks Consensus Estimate for TROW’s quarterly earnings has moved 1.3% north to $1.60 per share.
PFG is scheduled to release quarterly numbers on Feb 12. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +2.00%.
PFG’s quarterly earnings estimates have been revised 1% downward to $1.70 in the past week.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.