Shares of Capital One Financial Corp. (COF) achieved a new 52-week high, touching $73.00 in the first hour of the trading session on Dec 2, 2013. Nevertheless, the stock closed the session at $72.10, registering a solid year-to-date return of 19.5%. The trading volume for the session was 3.9 million shares, up from the 3-month average of 2.9 million.
Despite the strong price appreciation, this Zacks Rank #2 (Buy) stock has plenty of upside left, given the estimate revisions over the last 60 days and long-term earnings growth rate of 7.8%.
Growth Drivers
Impressive third-quarter 2013 results, which beat the Zacks Consensus Estimate by 6.2%, along with improvement in profitability ratios were the primary growth drivers for Capital One.
On Oct 18, Capital One reported third-quarter results. The company’s earnings of $1.86 per share outpaced the Zacks Consensus Estimate of $1.77. The quarter witnessed higher-than-expected revenues and improved profitability ratios. However, higher expenses and deteriorating capital ratios were dampeners. Meanwhile, asset quality was a mixed bag.
Further, in Sep 2013, Capital One completed the sale of certain private label and co-branded credit card accounts worth $6 billion to Citigroup, Inc. (C). Hence, with the closure of the deal, the company resumed its $1 billion share repurchase program.
Estimate Revisions
Over the last 60 days, 15 out of 16 estimates for 2013 have been revised upward, lifting the Zacks Consensus Estimate by 3.4% to $7.05 per share. For 2014, 11 of 17 estimates moved north over the same time frame, causing the Zacks Consensus Estimate to rise 1.8% to $6.92 per share.
Other players in the finance industry that presently look attractive include Affiliated Managers Group Inc. (AMG) and Evercore Partners Inc. (EVR). Both these stocks carry the same Zacks Rank as Capital One.
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