Balanced View on Capital One Financial - Analyst Blog

On Jun 2, 2014, we issued an updated research report on Capital One Financial Corporation (COF). 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 interest income.

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. (KCG), Woori Finance Holdings Co., Ltd. (WF) and Central Pacific Financial Corp. (CPF) 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 Report
 
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