Why Capital One Financial (COF) Is Falling Today

NEW YORK (TheStreet) -- Capital One Financial (COF) fell 5% to $72.65 Friday following an earnings report that didn't meet analyst expectations.

The credit card lender reported fourth-quarter earnings of $1.45 a share, 10 cents lower than the estimated $1.55 a share according to analysts surveyed by Yahoo! Finance. Capital One also announced a decrease in credit card and consumer loans in the fourth quarter, which led to revenue of $5.54 billion, a 1.4% decline year over year. The bank said total net revenue from its credit segment also dropped by 10% to $3.4 billion.

Susquehanna downgraded Capital One to "neutral" from "positive" with a price target of $78 Friday. On the same day, Jefferies reiterated its "buy" rating, and raised the price target to $88 from $80.

TheStreet Ratings team rates CAPITAL ONE FINANCIAL CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate CAPITAL ONE FINANCIAL CORP (COF) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, good cash flow from operations, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The debt-to-equity ratio is somewhat low, currently at 0.76, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
  • Net operating cash flow has significantly increased by 93.37% to $9,632.00 million when compared to the same quarter last year. In addition, CAPITAL ONE FINANCIAL CORP has also vastly surpassed the industry average cash flow growth rate of -63.64%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • CAPITAL ONE FINANCIAL CORP's earnings per share declined by 7.4% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, CAPITAL ONE FINANCIAL CORP reported lower earnings of $6.70 versus $7.05 in the prior year. This year, the market expects an improvement in earnings ($7.08 versus $6.70).
  • You can view the full analysis from the report here: COF Ratings Report

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