On Oct 4, 2013, we upgraded our long-term recommendation on
Capital One Financial Corp.
) to Outperform from Neutral. This was based on the company's
enhanced capital deployment plans.
The Rationale Behind the Upgrade
Capital One's continued capital deployment activities make it an
attractive pick for yield-seeking investors. Given its strong
capital and balance sheet position, the company will continue
boosting shareholders' value going forward. Further, over the
past few years, many strategic decisions by Capital One helped it
to counter economic challenges. The company prudently diversified
into other areas of consumer banking by focusing on the healthy
businesses while largely avoiding relatively less profitable
ventures such as mortgages.
Additionally, Capital One remained strong with respect to its
credit card businesses. The U.S. Card business continues to
deliver strong returns on a risk-adjusted basis, with a
consistent rise in revenues.
for the company is +7.51%. This, along with its Zacks Rank #2
(Buy), makes us confident of a positive earnings surprise. The
company's second-quarter 2013 earnings substantially surpassed
the Zacks Consensus Estimate.
Moreover, the Zacks Consensus Estimate for 2013 advanced 3.8% to
$6.82 per share over the last 90 days. Further, for 2014, the
Zacks Consensus Estimate increased 1.6% to $6.80 per share over
the same time period.
Other Stocks to Consider
Apart from Capital One, other financial institutions worth
Regional Management Corp.
World Acceptance Corp.
Cash America International, Inc.
). While Regional Management Corp. and World Acceptance Corp.
carry a Zacks Rank #1 (Strong Buy), Cash America International
has the same Zacks Rank as Capital One.
CAPITAL ONE FIN (COF): Free Stock Analysis
CASH AM INTL (CSH): Free Stock Analysis
REGIONAL MANAGE (RM): Free Stock Analysis
WORLD ACCEPTANC (WRLD): Free Stock Analysis
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