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Why Is Capital One (COF) Up 10.7% Since Last Earnings Report?
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It has been about a month since the last earnings report for Capital One (COF - Free Report) . Shares have added about 10.7% in that time frame, outperforming 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 Q1 Earnings and Revenues Beat Estimates, Costs Stable Y/Y
Capital One’s first-quarter 2021 adjusted earnings of $7.03 per share outpaced the Zacks Consensus Estimate of $4.17. Further, the bottom line improved significantly from adjusted loss of $3.02 incurred in the year-ago quarter.
Results reflected improvement in non-interest income and stable expenses. Further, provision benefits, mainly due to reserve releases, supported the financials. However, lower interest rates and lower loan balance hurt NII, which declined during the quarter.
Net income available to common shareholders was $3.24 billion against a net loss of $1.42 billion in the prior-year quarter.
Revenues Down, Expenses Stable
Total net revenues were $7.11 billion, down 2% from the prior-year quarter. However, the top line beat the Zacks Consensus Estimate of $6.92 billion.
NII fell 3% from the prior-year quarter to $5.82 billion. NIM also declined 79 basis points (bps) to 5.99% due to lower yields on interest-earning assets.
Non-interest income of $1.29 billion rose 5% from the prior-year quarter.
Non-interest expenses were $3.74 billion, relatively stable year over year.
Efficiency ratio was 52.58%, up from 51.44% in the year-ago quarter. A rise in efficiency ratio indicates deterioration in profitability.
As of Mar 31, 2021, loans held for investment were $243.1 billion, down 3% from the prior quarter. Total deposits, as of the same date, grew 2% to $310.3 billion.
Credit Quality Improves
Provision for credit losses was a benefit of $823 million against a provision of $5.42 billion. This was mainly driven by $1.6 billion of reserve releases. Further, the 30-plus day performing delinquency rate declined 113 bps to 1.82%.
Also, net charge-off rate decreased 151 bps year over year to 1.21%. However, allowance, as a percentage of reported loans held for investment was 5.77%, up 42 bps.
Capital Ratios Improve
As of Mar 31, 2021, Tier 1 risk-based capital ratio was 16.2%, up from 13.7% a year ago. Further, common equity Tier 1 capital ratio was 14.6% as of Mar 31, 2021, up from 12.0%.
Share Repurchase Update
In the quarter, Capital One repurchased 4.3 million shares for $490 million under its $7.5 billion authorization.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 20.13% due to these changes.
VGM Scores
Currently, Capital One has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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 #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Capital One (COF) Up 10.7% Since Last Earnings Report?
It has been about a month since the last earnings report for Capital One (COF - Free Report) . Shares have added about 10.7% in that time frame, outperforming 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 Q1 Earnings and Revenues Beat Estimates, Costs Stable Y/Y
Capital One’s first-quarter 2021 adjusted earnings of $7.03 per share outpaced the Zacks Consensus Estimate of $4.17. Further, the bottom line improved significantly from adjusted loss of $3.02 incurred in the year-ago quarter.
Results reflected improvement in non-interest income and stable expenses. Further, provision benefits, mainly due to reserve releases, supported the financials. However, lower interest rates and lower loan balance hurt NII, which declined during the quarter.
Net income available to common shareholders was $3.24 billion against a net loss of $1.42 billion in the prior-year quarter.
Revenues Down, Expenses Stable
Total net revenues were $7.11 billion, down 2% from the prior-year quarter. However, the top line beat the Zacks Consensus Estimate of $6.92 billion.
NII fell 3% from the prior-year quarter to $5.82 billion. NIM also declined 79 basis points (bps) to 5.99% due to lower yields on interest-earning assets.
Non-interest income of $1.29 billion rose 5% from the prior-year quarter.
Non-interest expenses were $3.74 billion, relatively stable year over year.
Efficiency ratio was 52.58%, up from 51.44% in the year-ago quarter. A rise in efficiency ratio indicates deterioration in profitability.
As of Mar 31, 2021, loans held for investment were $243.1 billion, down 3% from the prior quarter. Total deposits, as of the same date, grew 2% to $310.3 billion.
Credit Quality Improves
Provision for credit losses was a benefit of $823 million against a provision of $5.42 billion. This was mainly driven by $1.6 billion of reserve releases. Further, the 30-plus day performing delinquency rate declined 113 bps to 1.82%.
Also, net charge-off rate decreased 151 bps year over year to 1.21%. However, allowance, as a percentage of reported loans held for investment was 5.77%, up 42 bps.
Capital Ratios Improve
As of Mar 31, 2021, Tier 1 risk-based capital ratio was 16.2%, up from 13.7% a year ago. Further, common equity Tier 1 capital ratio was 14.6% as of Mar 31, 2021, up from 12.0%.
Share Repurchase Update
In the quarter, Capital One repurchased 4.3 million shares for $490 million under its $7.5 billion authorization.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 20.13% due to these changes.
VGM Scores
Currently, Capital One has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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 #3 (Hold). We expect an in-line return from the stock in the next few months.