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Will Capital One (COF) Disappoint Investors in Q2 Earnings?

Capital One Financial Corporation COF is scheduled to report second-quarter 2017 results on Jul 20, after the market closes. Its revenues and earnings are expected to grow year over year.

Last quarter, a decline in non-interest income, an increase in provisions and higher expenses were responsible for Capital One lagging the Zacks Consensus Estimate. However, higher net interest income (NII) and easing margin pressure supported the results to quite an extent.

Also, the company does not have an impressive earnings surprise history, as it lagged the Zacks Consensus Estimate in three of the trailing four quarters, with an average negative surprise of 4.9%.

The Zacks Consensus Estimate of $1.90 for the to-be-reported quarter has also been revised more than 1% downward in the last 30 days.

The price performance of the company has also been disappointing. Capital One’s shares fell 6.5% year to date compared with the Zacks categorized Financial - Consumer Loans industry’s decline of 4.6%.

Earnings Whispers

According to our quantitative model, chances of Capital One beating the Zacks Consensus Estimate in the second quarter are quite low. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #3 (Hold) or better for increasing the odds of an earnings beat. But, this is not the case here as elaborated below.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: The Earnings ESP for Capital One is -1.58%. This is because the Most Accurate estimate of $1.87 is below the Zacks Consensus Estimate of $1.90.

Zacks Rank: Capital One currently has a Zacks Rank #4 (Sell), which reduces the predictive power of ESP.

Factors to Influence Q2 Results

Stable Revenues: A decent increase in commercial and credit card loans in the quarter should led to a rise in Capital One’s net interest income. Also, higher rates are expected to support the company’s NII to some extent.

However, as the performance of the auto industry remained relatively weak, the company may witness a slightly weaker demand for auto loans. Hence, overall revenues are likely to remain more or less stable.

Marginal Increase in Expenses: With moderate improvement in loan balances, marketing expenses are anticipated to rise slightly.

Stocks that Warrant a Look

Here are a few finance stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming release.

Citizens Financial Group, Inc. CFG is slated to report second-quarter results on Jul 21. It has an Earnings ESP of +1.70% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fifth Third Bancorp’s FITB Earnings ESP is +2.38%. It carries a Zacks Rank #3. The company is expected to release second-quarter results on Jul 21.

Huntington Bancshares Incorporated HBAN has an Earnings ESP of +4.35% and a Zacks Rank #3. It is scheduled to report second-quarter results on Jul 21.

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Fifth Third Bancorp (FITB): Free Stock Analysis Report
 
Huntington Bancshares Incorporated (HBAN): Free Stock Analysis Report
 
Capital One Financial Corporation (COF): Free Stock Analysis Report
 
Citizens Financial Group, Inc. (CFG): Free Stock Analysis Report
 
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