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Can Interest Income Aid Capital One's (COF) Earnings in Q2?
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Capital One (COF - Free Report) is slated to release second-quarter 2018 results tomorrow, after market close. The company will likely witness an increase in total net interest income (NII) on a year-over-year basis.
Driven by an improving economy, purchase volume growth and credit card loans (part of broader consumer loan portfolio) continued to increase during the second quarter. This, along with higher interest rates, are likely to support Capital One’s credit card NII.
Moreover, the acquisition of Cabela's Incorporated’s credit card operations in September 2017 is expected to further support credit card NII growth. The Zacks Consensus Estimate for domestic credit card NII for the quarter is $3.21 billion, which shows 6.5% year-over-year rise. Also, international credit card NII is projected to be $325 million, increasing 14.5%. Therefore, the Zacks Consensus Estimate for credit card NII of $3.53 billion indicates 7.2% growth on a year-over-year basis.
Further, the consensus estimate for commercial banking NII of $570 million shows a marginal year-over-year improvement. Also, NII for consumer banking division is expected to be $1.63 billion, up 3.1% from the prior-year quarter.
Hence, Capital One will likely report an increase in total NII for the to-be-reported quarter.
Other Factors to Influence Results
Modest fee income growth: Capital One is expected to record an increase in fee income in the to-be-reported quarter. As the quarter is likely to show increased card usage, interchange fees (major part of its fee income) are expected to rise.
Marginal increase in expenses: Similar to the first quarter, operating expenses are expected to trend upward in the to-be-reported quarter. Specifically, marketing expenses will likely remain elevated with rising loan growth opportunities.
Asset quality to worsen: While improvement in card loans is leading to an increase in interest income, Capital One will continue witnessing a rise in credit card delinquency rates. Also, the charge-off rate in auto finance business will likely increase.
Now, let’s have a look at what our quantitative model predicts:
According to our quantitative model, chances of Capital One beating the Zacks Consensus Estimate in the second quarter 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 — to increase the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks ESP: The Earnings ESP for Capital One is -0.08%.
Zacks Rank: Capital One currently has a Zacks Rank #3. This increases the predictive power of ESP but we need to have positive ESP to be sure of an earnings beat.
Capital One Financial Corporation Price and EPS Surprise
The Zacks Consensus Estimate for earnings for the quarter of $2.62 reflects year-over-year jump of 33.7%. Also, the consensus estimate for sales for the to-be-reported quarter is $6.96 billion, which indicates 3.8% growth from the prior-year quarter.
Stocks That Warrant a Look
Here are a few banks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming release.
SunTrust Banks (STI - Free Report) is slated to release results on Jul 20. It has an Earnings ESP of +0.31% and carries a Zacks Rank #2 (Buy).
State Street (STT - Free Report) has an Earnings ESP of +0.28% and a Zacks Rank #3. It is scheduled to release results on Jul 20.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
Image: Bigstock
Can Interest Income Aid Capital One's (COF) Earnings in Q2?
Capital One (COF - Free Report) is slated to release second-quarter 2018 results tomorrow, after market close. The company will likely witness an increase in total net interest income (NII) on a year-over-year basis.
Driven by an improving economy, purchase volume growth and credit card loans (part of broader consumer loan portfolio) continued to increase during the second quarter. This, along with higher interest rates, are likely to support Capital One’s credit card NII.
Moreover, the acquisition of Cabela's Incorporated’s credit card operations in September 2017 is expected to further support credit card NII growth. The Zacks Consensus Estimate for domestic credit card NII for the quarter is $3.21 billion, which shows 6.5% year-over-year rise. Also, international credit card NII is projected to be $325 million, increasing 14.5%. Therefore, the Zacks Consensus Estimate for credit card NII of $3.53 billion indicates 7.2% growth on a year-over-year basis.
Further, the consensus estimate for commercial banking NII of $570 million shows a marginal year-over-year improvement. Also, NII for consumer banking division is expected to be $1.63 billion, up 3.1% from the prior-year quarter.
Hence, Capital One will likely report an increase in total NII for the to-be-reported quarter.
Other Factors to Influence Results
Modest fee income growth: Capital One is expected to record an increase in fee income in the to-be-reported quarter. As the quarter is likely to show increased card usage, interchange fees (major part of its fee income) are expected to rise.
Marginal increase in expenses: Similar to the first quarter, operating expenses are expected to trend upward in the to-be-reported quarter. Specifically, marketing expenses will likely remain elevated with rising loan growth opportunities.
Asset quality to worsen: While improvement in card loans is leading to an increase in interest income, Capital One will continue witnessing a rise in credit card delinquency rates. Also, the charge-off rate in auto finance business will likely increase.
Now, let’s have a look at what our quantitative model predicts:
According to our quantitative model, chances of Capital One beating the Zacks Consensus Estimate in the second quarter 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 — to increase the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks ESP: The Earnings ESP for Capital One is -0.08%.
Zacks Rank: Capital One currently has a Zacks Rank #3. This increases the predictive power of ESP but we need to have positive ESP to be sure of an earnings beat.
Capital One Financial Corporation Price and EPS Surprise
Capital One Financial Corporation Price and EPS Surprise | Capital One Financial Corporation Quote
The Zacks Consensus Estimate for earnings for the quarter of $2.62 reflects year-over-year jump of 33.7%. Also, the consensus estimate for sales for the to-be-reported quarter is $6.96 billion, which indicates 3.8% growth from the prior-year quarter.
Stocks That Warrant a Look
Here are a few banks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming release.
KeyCorp (KEY - Free Report) is slated to report results on Jul 19. It has an Earnings ESP of +0.40% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
SunTrust Banks (STI - Free Report) is slated to release results on Jul 20. It has an Earnings ESP of +0.31% and carries a Zacks Rank #2 (Buy).
State Street (STT - Free Report) has an Earnings ESP of +0.28% and a Zacks Rank #3. It is scheduled to release results on Jul 20.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>