Capital One Financial (COF) saw a rise in its stock during after-hours trading following the release of its second-quarter results, which showcased impressive adjusted earnings. The company reported adjusted earnings per share of $5.48, significantly exceeding analysts’ consensus estimate of $4.04. Revenue showed a robust year-over-year growth of 25%, reaching $12.5 billion, though it fell slightly short of the anticipated $12.72 billion.
Despite reporting a net loss of $4.3 billion, or $8.58 per share, due to one-time charges from its recent acquisition of Discover Financial, CEO Richard Fairbank emphasized the strength of Capital One’s core operations. The company’s net interest margin improved by 69 basis points to 7.62%, and credit card loans surged by 72% to $269.7 billion, largely attributed to the integration of Discover’s portfolio.
Overall loans held for investment increased by 36% to $439.3 billion, with notable growth in consumer and auto loans. Additionally, deposits rose by 27% to $468.1 billion, underscoring solid operational performance. The Common Equity Tier 1 capital ratio stood at 14%, indicating a stable capital position.
However, it’s important to acknowledge the increase in provision for credit losses to $11.4 billion, which reflects necessary adjustments following the merger with Discover.
Looking ahead, analysts appear optimistic about COF stock, with a Strong Buy consensus rating based on 13 Buys and three Holds over the past three months. The average price target of $244.57 per share suggests an upside potential of 12.49%.
This situation reflects a mixed outlook where the challenges of integrating a major acquisition are present but are accompanied by tangible growth in core metrics. Capital One’s focus on strengthening its operations and expectations for long-term growth could provide investors with a positive angle despite the current volatility.