Earnings Preview: Capital One Financial

Capital One Financial Corp. (COF) is expected to report Q3 earnings after market close Thursday Oct. 16 with a conference call scheduled for 10:00 am Friday Oct. 17.

Guidance

Analysts are looking for EPS of $1.01 on revenue of $4.23B. The consensus range for EPS is 73c to $1.17, while the consensus range for revenue is $4.12B to $4.33B, according to First Call.

Analyst Views

Capital One recently predicted that its charge-off rate in Q3 was in the low 6% range in Q3, and the company forecast that its Q4 charge-off rate would increase to about 7% in Q4. The card issuer did a 14M share secondary offering on September 24.

Oppenheimer believes that Capital One is one of the most expensive bank stocks in their coverage universe, and the firm does not think the Street adequately appreciates the impact of the reduction of the company's portfolio. On a positive note, the firm is not worried about the card issuer's capital level. Oppenheimer maintained its Market Perform rating on the shares.

In recent weeks, two other firms have seen the company in a more positive light. Keefe Bruyette upgraded the company to Outperform from Market Perform, citing valuation. Calyon raised Capital One to Add from Neutral because the firm thinks the company has set aside the correct amount of reserves.

Credit card issuers' losses are increasing, even as their funding costs are also rising, The Wall Street Journal recently reported. As a result, credit card companies, including Capital One, may have major problems, the newspaper believes.

Comments

[Ermilo:]

Capitol one financial will endure. They might be volatile short term, but they set side enough reserves to be fine.

2008 Oct 16 06:01 PM