On Jun 2, 2014, we issued an updated research report on
Capital One Financial Corporation
). The company exhibits decent fundamentals amid a competitive
environment in the industry.
We remain optimistic owing to Capital One's ability to sustain
top-line growth. Though revenues fell 3% year over year in
first-quarter 2014, the company has recorded growth in revenues
over the last three years at a CAGR of 17.3% (2011-2013). Further,
the company continues to remain strong in its Credit Card business.
Notably, in first-quarter 2014, Domestic Card accounted for 89% of
net revenues for the Credit Card segment.
Capital One's efficient capital deployment activities are
commendable. Not only is the company a steady dividend payer, it
has a share repurchase program as well that received recent
approval by the Federal Reserve. The company plans to repurchase
$2.5 billion shares by the end of first quarter-2015.
Capital One's first-quarter 2014 earnings per share of $1.96
outpaced the Zacks Consensus Estimate by 17.4%. Also it was up
10.7% from the prior-year earnings. Results were aided by lower
expenses, rise in fee income, partially offset by a decline in net
Despite the positives, we remain cautious owing to several issues
faced by Capital One. These include absence of steady improvement
in cost control measures, unstable credit quality and the
prevailing stringent regulatory landscape, which may limit the
company's profitability in the near term.
Analysts' mixed stance on the stock was reflected in the movement
of the Zacks Consensus Estimate over the past 60 days. For 2014,
the Zacks Consensus Estimate increased 0.3% to $7.18 per share
while for 2015 it remained stable at $7.38 per share.
Capital One currently carries a Zacks Rank #3 (Hold)
Stocks That Warrant a Look
KCG Holdings, Inc.
Woori Finance Holdings Co., Ltd.
Central Pacific Financial Corp.
) are among the better-ranked stocks in the finance sector. All of
these hold a Zacks Rank #1 (Strong Buy).
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CAPITAL ONE FIN (COF): Free Stock Analysis
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