Capital One Financial Corp. (NYSE: COF) – Q1 FY 2011 Earnings Preview
Wednesday, April 20, 2011 2:28 PM

Capital One Financial Corp. (NYSE: COF) hopes to put another nice earnings per share increase in investor wallets when it reports first quarter FY 2011 earnings on April 21, 2011. In fiscal 2011, the company's reported EPS exceeded analysts' consensus estimates by margins in the range of 11.80 percent to 137.30 percent.

Capital One is a financial holding company with subsidiaries that include Capital One National Association and Capital One Bank National Association (USA). The company had $122.2 billion in deposits and $197.5 billion in total assets outstanding as of December 31, 2010. It is one of the largest credit card companies in the United States. Following the success of its credit card business, the company has branched out to become a major player in retail banking, auto finance, mortgage lendin, and other financial services. Capital One Financial Corp. is a Fortune 500 company.

For the fourth quarter FY 2010, the company reported total revenues of $3.96 billion, a decrease of $54 million, or 1.3 percent, from $4.01 billion reported for the same period last year. Results reflected slightly lower average loans and the full quarter impact of implementing the CARD Act. Net income for the fourth quarter of 2010 was $697 million, or $1.52 per common share, an increase of 85 percent compared with fourth quarter 2009 net income of $376 million, or $0.83 per share. For the full year of 2010, net income was $2.7 billion, or $6.01 per share, compared with net income of $320 million, or $0.74 per share for 2009 including the ($563.9) million, or ($1.31) per share, impact to net income from the repayment of the government's TARP preferred share investment in 2009.

In the credit services industry, Capital One competes with companies such as American Express Co. (NYSE: AXP), Bank of America Corp. (NYSE: BAC) and Discover Financial Services (NYSE: DFS). For the trailing 12 months, AMEX has reported earnings of $3.35 per share on revenue of $25.61 billion, with a quarterly revenue growth of 23.40 percent. BAC has reported a loss of $0.37 per share on revenue of $81.78 billion, with quarterly revenue growth of 15.40 percent. Discover has reported an EPS of $2.27 per share on revenue of $4.46 billion, with quarterly revenue growth of 332.40 percent. On the other hand, Capital One reported earnings of $6.01 per share on revenue of $12.26 billion, with quarterly revenue growth of 23.90 percent.

Capital One Financial Corp. has a P/E ratio of 8.63, lower than industry's P/E of 19.90. The P/B ratio of the company is lower at 0.88, compared with the industry's P/B of 2.46. The company's net profit margin is 22.31 percent, better than the industry's margin of 9 percent. The ROE of the company is at 11.48 percent, compared with the industry's ROE of 11 percent.

On January 27, 2011, the company reported its first quarter FY 2011 regular cash dividend of $0.05 per share, which was paid on February 22, 2011 to shareholders of record as of February 11, 2011. On January 31, 2008, the company's board of directors authorized the repurchase of up to $2 billion of the company's common stock. However, the company did not repurchase any of its common stock during FY 2008, FY 2009, and FY 2010 due to the market conditions.

For the first quarter ending March 31, 2011, analysts' estimates of earnings range from the low of $1.14 per share to the high of $1.96 per share, compared with the consensus estimate of $1.48 per share to $1.40 per share in the year ago quarter. Analysts' revenue estimates for the fourth quarter range from a low of $3.81 billion to a high of $4 billion, compared with a consensus estimate of $3.91 billion to $4.29 billion in the same quarter a year ago. For the quarter ended March 31, 2011, the consensus EPS forecast has increased from $1.37 per share estimated 60 days ago to the current estimate of $1.48 per share. In the last 52 weeks, COF is trading in the range of $36.10 to $52.98. The last trading price of the stock was $51.67 on April 5, 2011. The company's stock has been rated a sell by analysts at Argus.



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