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 3.2% Since Last Earnings Report?
Read MoreHide Full Article
It has been about a month since the last earnings report for Capital One (COF - Free Report) . Shares have added about 3.2% 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 catalysts.
Capital One Q4 Earnings Beat on Loans, Provisions Rise
Capital One’s fourth-quarter 2021 earnings of $5.41 per share easily surpassed the Zacks Consensus Estimate of $5.14. The bottom line improved 2% from the year-ago quarter’s adjusted number.
Results benefited from a solid rise in loan balances, which supported net interest income and margin. Higher consumer confidence aided credit card business and non-interest income. However, an increase in operating expenses was a headwind. During the quarter, the company recorded provision for credit losses.
Net income available to common shareholders (GAAP basis) was $2.3 billion, down 7% from the prior-year quarter.
In 2021, adjusted earnings per share of $27.11 beat the consensus estimate of $26.64 and witnessed substantial improvement from $5.79 earned in 2020. Net income available to common shareholders (GAAP basis) was $12 billion or $26.94 per share, up significantly from $2.38 billion or $5.18 per share in 2020.
Revenues & Expenses Rise, Loan Balance Up
Total net revenues in the quarter were $8.12 billion, up 11% from the prior-year quarter. The top line also beat the Zacks Consensus Estimate of $7.93 billion.
In 2021, total net revenues grew 7% to $30.44 billion. The top line also outpaced the Zacks Consensus Estimate of $30.25 billion.
Net interest income improved 10% from the prior-year quarter to $6.45 billion.
Net interest margin surged 55 basis points (bps) to 6.60%. This was largely driven by lower rates on interest-bearing liabilities, higher yields and average card balances and a fall in average cash balance.
Non-interest income of $1.67 billion increased 14%. This was primarily attributable to growth in net interchange fees (up 23%) and service charges and other customer-related fees (up 29%).
Non-interest expenses were $4.68 billion, rising 17%. The increase was mainly due to a 77% surge in marketing expenses. Adjusted expenses increased 16% to $4.68 billion.
Efficiency ratio was 57.63%, up from 54.64% in the year-ago quarter. A rise in efficiency ratio indicates deterioration in profitability.
As of Dec 31, 2021, loans held for investment were $277.3 billion, up 6% from the prior quarter. Total deposits, as of the same date, rose 2% to $311 billion.
Credit Quality: A Mixed Bag
Provision for credit losses jumped 44% year over year to $381 million.
However, the 30-plus day performing delinquency rate declined 16 bps to 2.25%. Net charge-off rate decreased 59 bps year over year to 0.79%. Allowance, as a percentage of reported loans held for investment, was 4.12%, down 207 bps.
Capital Ratios Deteriorates
As of Dec 31, 2021, Tier 1 risk-based capital ratio was 14.5%, down from 15.3% a year ago. Common equity Tier 1 capital ratio was 13.1% as of Dec 31, 2021, down from 13.7%.
Share Repurchase Update
During the quarter, Capital One repurchased 17 million shares for $$2.6 billion. This completed the company’s $7.5 billion buyback authorization.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, Capital One has a poor Growth Score of F, however its Momentum Score is doing a lot 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending downward 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.
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 3.2% 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 3.2% 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 catalysts.
Capital One Q4 Earnings Beat on Loans, Provisions Rise
Capital One’s fourth-quarter 2021 earnings of $5.41 per share easily surpassed the Zacks Consensus Estimate of $5.14. The bottom line improved 2% from the year-ago quarter’s adjusted number.
Results benefited from a solid rise in loan balances, which supported net interest income and margin. Higher consumer confidence aided credit card business and non-interest income. However, an increase in operating expenses was a headwind. During the quarter, the company recorded provision for credit losses.
Net income available to common shareholders (GAAP basis) was $2.3 billion, down 7% from the prior-year quarter.
In 2021, adjusted earnings per share of $27.11 beat the consensus estimate of $26.64 and witnessed substantial improvement from $5.79 earned in 2020. Net income available to common shareholders (GAAP basis) was $12 billion or $26.94 per share, up significantly from $2.38 billion or $5.18 per share in 2020.
Revenues & Expenses Rise, Loan Balance Up
Total net revenues in the quarter were $8.12 billion, up 11% from the prior-year quarter. The top line also beat the Zacks Consensus Estimate of $7.93 billion.
In 2021, total net revenues grew 7% to $30.44 billion. The top line also outpaced the Zacks Consensus Estimate of $30.25 billion.
Net interest income improved 10% from the prior-year quarter to $6.45 billion.
Net interest margin surged 55 basis points (bps) to 6.60%. This was largely driven by lower rates on interest-bearing liabilities, higher yields and average card balances and a fall in average cash balance.
Non-interest income of $1.67 billion increased 14%. This was primarily attributable to growth in net interchange fees (up 23%) and service charges and other customer-related fees (up 29%).
Non-interest expenses were $4.68 billion, rising 17%. The increase was mainly due to a 77% surge in marketing expenses. Adjusted expenses increased 16% to $4.68 billion.
Efficiency ratio was 57.63%, up from 54.64% in the year-ago quarter. A rise in efficiency ratio indicates deterioration in profitability.
As of Dec 31, 2021, loans held for investment were $277.3 billion, up 6% from the prior quarter. Total deposits, as of the same date, rose 2% to $311 billion.
Credit Quality: A Mixed Bag
Provision for credit losses jumped 44% year over year to $381 million.
However, the 30-plus day performing delinquency rate declined 16 bps to 2.25%. Net charge-off rate decreased 59 bps year over year to 0.79%. Allowance, as a percentage of reported loans held for investment, was 4.12%, down 207 bps.
Capital Ratios Deteriorates
As of Dec 31, 2021, Tier 1 risk-based capital ratio was 14.5%, down from 15.3% a year ago. Common equity Tier 1 capital ratio was 13.1% as of Dec 31, 2021, down from 13.7%.
Share Repurchase Update
During the quarter, Capital One repurchased 17 million shares for $$2.6 billion. This completed the company’s $7.5 billion buyback authorization.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, Capital One has a poor Growth Score of F, however its Momentum Score is doing a lot 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending downward 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.