Capital One Missed The Consensus In Q1, What’s Next?

COF: Capital One Financial logo
Capital One Financial

Capital One’s stock (NYSE: COF) has lost 4% YTD, as compared to the 8% increase in the S&P500 over the same period. Further, at its current price of $89 per share, the stock is trading 19% below its fair value of $110 – Trefis’ estimate for Capital One’s valuationThe company missed the consensus estimates in the first quarter of 2023, despite a 9% y-o-y increase in revenue to $8.9 billion. The revenues benefited from a 12% rise in the net interest income (NII), partially offset by a 3% drop in the noninterest revenues. The NII benefited from a higher net interest margin and an increase in the outstanding loan balance. On the cost front, the provisions for credit losses witnessed an unfavorable build-up from $677 million to $2.8 billion. This coupled with a 9% rise in non-interest expenses, led to a 62% decline in the adjusted net income to $887 million.

The top line improved 13% y-o-y to $34.3 billion in FY 2022, driven by a 12% rise in the net interest income and a 14% growth in the non-interest revenues. It was partly due to higher interest rates and loan growth, and partly because of a recovery in consumer spending. That said, the provisions figure rose from -$1.9 billion to $5.8 billion. Further, the non-operating expenses increased by 16% in the year. Overall, it resulted in a net loss of 41% despite positive revenue growth.

Moving forward, we estimate Capital One revenues to touch $36.9 billion in FY2023. Additionally, COF’s net income margin is likely to reduce from 20.6% to 11.9% in the year, leading to an adjusted net income of $4.4 billion and an annual GAAP EPS of $11.94. This coupled with a P/E multiple of just above 9x will lead to a valuation of $110.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns May 2023
MTD [1]
YTD [1]
Total [2]
 COF Return -8% -4% 2%
 S&P 500 Return -1% 8% 85%
 Trefis Multi-Strategy Portfolio 0% 8% 240%
Relevant Articles
  1. Capital One Stock Has Limited Upside Potential
  2. Capital One Stock Gained 12% In One Week
  3. Capital One Stock To Post Mixed Results In Q4?
  4. What To Expect From Capital One Stock In Q3?
  5. Is Capital One Stock Still Attractive At The Current Levels?
  6. Where Is Capital One Stock Headed?

[1] Month-to-date and year-to-date as of 5/9/2023
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market Beating Portfolios
See all Trefis Price Estimates