Capital One COF is slated to report second-quarter 2024 results on Jul 23, 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.
In the last quarter, the company’s earnings lagged the Zacks Consensus Estimate. Results were adversely impacted by higher expenses and a sequential fall in loan balance. However, an increase in net interest income (NII) and non-interest income, and lower provisions acted as tailwinds.
Capital One does not have an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in two and lagged in two of the trailing four quarters.
Capital One Financial Corporation Price and EPS Surprise 
Capital One Financial Corporation price-eps-surprise | Capital One Financial Corporation Quote
Key Factors & Estimates for Q2
Net Interest Income: The overall lending scenario was decent in the quarter, driven by some clarity on the macroeconomic front. The Zacks Consensus Estimate for total average earning assets of $451 billion indicates a 2.5% rise from the prior-year quarter’s reported figure. Our estimate for the metric is pinned at $450.9 billion.
The Federal Reserve kept interest rates unchanged at a 13-year high of 5.25-5.5% during the quarter. Thus, despite higher funding costs exerting some pressure on COF’s NII, the metric is expected to have improved, driven by higher rates and decent consumer loan growth.
Also, Capital One’s efforts to strengthen its card operations are expected to have provided some support. The consensus estimate for NII of $7.52 billion indicates 5.8% growth. Our estimate for NII is pegged at $7.47 billion.
Fee income: Capital One’s interchange fees (constituting more than 60% of fee income) are likely to have improved in the quarter, given the rise in card usage. The Zacks Consensus Estimate for interchange fees is $1.27 billion, suggesting a 5.1% increase. Our estimate for the metric is $1.22 billion.
The consensus estimate for service charges and other customer-related fees of $457.5 million implies 11.3% growth. The Zacks Consensus Estimate for other non-interest income is pegged at $269.8 million, indicating a 1.9% year-over-year fall. Our estimates for service charges and other customer-related fees, and other non-interest income are $441.4 million and $247.6 million, respectively.
The consensus estimate for total non-interest income of $1.99 billion suggests a rise of 4.8% from the prior-year quarter. We expect the metric to grow to $1.91 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 second 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 $5.22 billion, implying a year-over-year increase of 8.8%.
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 $2.66 billion, indicating a 5.9% rise from the year-ago quarter.
Earnings Whispers
According to our quantitative model, the chances of Capital One beating the Zacks Consensus Estimate for earnings this time are high. This is because it has 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 +1.52%.
Zacks Rank: The company currently carries a Zacks Rank of 3.
The Zacks Consensus Estimate for Capital One’s second-quarter earnings of $3.28 has been revised 8.6% north over the past seven days. The figure indicates a decline of 6.8% from the prior-year quarter.
The consensus estimate for sales is pegged at $9.51 billion, suggesting an increase of 5.5%.
Other Stocks That Warrant a Look
Here are a couple of other 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 too:
The Earnings ESP for Zions Bancorporation ZION is +1.38%, and it carries a Zacks Rank #3 at present. The company is slated to report second-quarter 2024 results on Jul 22.
Over the past seven days, the Zacks Consensus Estimate for ZION’s quarterly earnings has remained unchanged at $1.10.
East West Bancorp EWBC is scheduled to release second-quarter 2024 earnings on Jul 23. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +1.21%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
EWBC’s quarterly earnings estimates have remained unchanged at $1.97 over the past week.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How To Profit From Trillions On Spending For Infrastructure >>Capital One Financial Corporation (COF) : Free Stock Analysis Report
Zions Bancorporation, N.A. (ZION) : Free Stock Analysis Report
East West Bancorp, Inc. (EWBC) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
