Capital One (COF Quick QuoteCOF - Free Report) is slated to report third-quarter 2024 results on Oct. 24, after market close. Its earnings are expected to have witnessed a decrease on a year-over-year basis, while revenues are likely to have increased.

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In the last reported quarter, COF’s earnings lagged the Zacks Consensus Estimate. The results were negatively impacted by higher expenses and provisions. However, an increase in net interest income (NII), along with higher non-interest income, aided the results to some extent. Further, loan balances witnessed a sequential rise in the quarter, which was a positive.

Capital One does not have an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in one quarter and lagged in three of the trailing four quarters.

Key Factors Driving COF’s Q3 Performance & Estimates

Net Interest Income: On Sept. 18, the Federal Reserve announced a 50-basis point rate cut for the first time since March 2020. The impact on COF’s NII during the third quarter is unlikely to have been significant. Further, the inverted yield curve remained for the major part of the quarter. High funding costs are expected to have weighed on interest income.

The overall lending scenario was decent in the quarter, with a steady demand for consumer loans. The Zacks Consensus Estimate for total average earning assets of $452.7 billion indicates a 2.1% rise from the prior-year quarter’s reported figure. Our estimate for the metric is $450.6 billion.

Also, Capital One’s efforts to strengthen its card operations are expected to have provided some support. The consensus estimate for NII of $7.78 billion indicates 4.9% growth. Our estimate for NII is pegged at $7.69 billion.

Fee income: Capital One’s interchange fees (constituting more than 60% of fee income) are likely to have improved in the quarter under review, given increased card usage. The Zacks Consensus Estimate for interchange fees is $1.29 billion, suggesting a 4.4% increase. Our estimate for the metric is $1.31 billion.

The consensus estimate for service charges and other customer-related fees of $474.8 million implies 4.8% growth. The Zacks Consensus Estimate for other non-interest income is pegged at $267.6 million, indicating a 4.5% year-over-year rise. Our estimates for service charges and other customer-related fees, and other non-interest income are $477.4 million and $239.6 million, respectively.

The consensus estimate for total non-interest income of $2.02 billion suggests a rise of 4.1% from the prior-year quarter. We expect the metric to be $2.03 billion.

Expenses: Capital One has been witnessing a persistent rise in expenses over the past several quarters because of higher marketing costs. The company’s investment in technology upgrades leads to higher costs. These, along with inflation pressure, are expected to have led to an increase in operating expenses in the third quarter.

Also, the pending acquisition of Discover Financial Services is expected to have resulted in some merger-related charges in the to-be-reported quarter.

Our estimate for total non-interest expenses stands at $5.04 billion, implying a year-over-year increase of 3.8%.

Asset Quality: Capital One is expected to have set aside substantial money for potential bad loans, given the risks due to geopolitical and macroeconomic concerns.

Our estimate for provision for credit losses is pegged at $2.87 billion, indicating a 25.5% jump from the year-ago quarter.

Earnings Whispers for Capital One

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

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 -0.11%.

Zacks Rank: The company currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for earnings of $3.70 has been revised marginally upward over the past seven days. The figure indicates a decline of 16.9% from the prior year quarter.

The consensus estimate for sales is pegged at $9.79 billion, suggesting an increase of 4.5%.

Finance Stocks That Warrant a Look

Here are 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:
 
The Earnings ESP for Cathay General Bancorp (CATY Quick QuoteCATY - Free Report) is +1.20% and it carries a Zacks Rank #3 at present. The company is slated to report third-quarter 2024 results on Oct. 21.

Over the past seven days, the Zacks Consensus Estimate for CATY’s quarterly earnings has remained unchanged at 98 cents per share.

Zions Bancorporation (ZION Quick QuoteZION - Free Report) is scheduled to release quarterly numbers on Oct. 21. The company carries a Zacks Rank #3 at present and has an Earnings ESP of +1.19%.
 
ZION’s quarterly earnings estimates have remained unchanged at $1.16 per share over the past week.