Capital One Financial (NYSE: COF): Q4 Earnings Preview

Capital One Financial Corp. (NYSE: COF) is scheduled to release its fourth-quarter earnings after the closing bell on Thursday, January 20, 2011. Analysts, on average, expect the company to report earnings of $1.27 per share on revenue of $3.87 billion. In the year ago period, the company reported earnings of 83 cents per share on revenue of $4.37 billion.

Capital One Financial Corporation operates as the bank holding company for the Capital One Bank (USA), National Association and Capital One, National Association, which provide various financial products and services to consumers, small businesses, and commercial clients in the United States, Canada, and the United Kingdom.

In the preceding third quarter, the McLean, Virginia-based company's net income was $803 million, or $1.76 per share, compared to $394 million, or 87 cents per share, in the comparable quarter last year. Revenue increased $4.016 billion from $3.558 billion. Analysts, on average, expected the company to report earnings of $1.13 per share on revenue of $3.80 billion.

Capital One has benefited from an increase in retail spending and improved margins. Given the size of its bank, Capital One has the best funding profile of the credit card companies, which is expect to benefit margins and reduce its dependence on the capital markets. The company also reported a decline in delinquencies for the month of November and December 2010. A decline in delinquencies will have a direct impact on the provisions for losses which are expressed as a percent of total outstanding loans. 

However, recently passed regulations like the 12 cents limit per debit card transaction enforced by Federal Reserve last month could potentially limit its upside. On Thursday, analysts likely will ask for more details on the impact of financial and credit card regulation.

In terms of stock performance, COF shares have gained nearly 16 percent over the past year.

Full Disclosure: None.

Capital One Financial Corp. (NYSE: COF): Q4 Earnings Preview 2009

Capital One Financial Corp. (NYSE: COF) is scheduled to release its financial results for fourth quarter of fiscal year 2009 after the market close on Thursday, January 21, 2010. Analysts, on average, expect the company to report earnings of 45 cents a share on revenue of $4.32 billion. In the year ago quarter, the company reported a loss of $3.74 per share on revenue of $3.95 billion.

Capital One Financial Corporation, through its subsidiaries, provides various financial products and services to consumers, small businesses, and commercial clients in the United States.

In October, the McLean, Virginia-based company reported that its third-quarter profit unexpectedly rose 14% to $425.6 million, or 94 cents a share, from $374.1 million, or $1 a share, in the year-ago period. On a per-share basis, profit fell to 94 cents a share in the latest quarter from $1 a share last year. Capital One had 449.6 million common shares outstanding in the latest quarter, compared with 388.9 million a year ago. Revenue increased to $3.6 billion from $3.18 billion last year. Analysts, on average expected the credit card lender to report earnings of 14 cents a share on revenue of $4.12 billion.

Like other credit card lenders, Capital One Financial has been hurt by cuts in spending during the economic slump. However, the company is likely to benefit from improving consumer spending and delinquency trends. The Commerce Department reported last month that consumer pending climbed 0.5 percent last month after increasing 0.6 percent in October. Also, it appears that the credit-card industry losses have already peaked and are likely to decline significantly.

In a regulatory filing on Friday, the firm reported that credit-card delinquencies- an indicator of future loan losses - dropped in December, after at least six straight months of increases, though charge-off levels continued to rise from a month earlier. The company said that 30-day delinquencies eased to 5.78% from 5.87% in November in the lender's U.S.credit-card business, and they dropped to 6.55% from 6.6% internationally. Charge-offs - loans Capital One doesn't think it will be able to collect - climbed to 10.14% in December from 9.6% in November in its U.S. credit-card business and edged up to 9.58% from 9.5% internationally.

Few industry experts believe that credit card issuers like Capital One will be hurt by the Credit Card Accountability Responsibility and Disclosure Act of 2009, or the CARD Act, which will come into effect in February 2010. However, Stifel Nicolaus analyst Chris Brendler contends that the company has creatively repriced its credit card offerings that enable it to offset the impact of new legislation and to remain profitable.

The company's stock currently trades at a forward P/E (fye 31-Dec-10) of 20.22 and PEG ratio (5 yr expected) of 11.91. In terms of stock performance, Capital One shares have gained 137 percent over the past year.

Full Disclosure: None.