Capital One Posts Q4 Earnings Beat, Analysts Weigh In On Discover Acquisition

Capital One Financial Corp (NYSE:COF) reported better-than-expected earnings for the fourth quarter.

The company reported its quarterly results amid an exciting earnings season. Here are some key analyst takeaways.

• RBC Capital Markets analyst Jon Arfstrom reiterated a Sector Perform rating, while raising the price target from $180 to $200.
• Keefe, Bruyette & Woods analyst Sanjay Sakhrani maintained an Outperform rating and price target of $232.
• Truist Securities analyst Brian Foran reaffirmed a Buy rating and price target of $229.

Check out other analyst stock ratings.

RBC Capital Markets: Capital One Financial reported its fourth-quarter earnings at $2.67 per share. Core earnings of $3.09 per share beat the consensus of $2.80 per share. "Overall, this was a stable fundamental quarter with seasonally driven loan growth and consistent credit as highlights," Arfstrom said.

Capital One's outlook looks stable and credit is likely to "track with typical seasonality in the near term," the analyst stated. The acquisition of Discover Financial Services (NYSE:DFS) is still expected to close in early 2025. The deal provides “material revenue and cost-saving opportunities," he further wrote.

Keefe, Bruyette & Woods: Capital One's earnings beat was driven by lower provision and higher total revenues, offset partially by a higher tax rate and increased other expenses. The quarter was "solid," with stronger-than-expected US card credit quality trends, Sakhrani said.

"Importantly, the yr/yr change in delinquency rate for US Card turned negative in December and came in better than typical seasonality for the quarter, validating our view that there is quicker path towards normalized charge-offs for the segment," the analyst wrote.

Truist Securities: There are positive indicators for credit, Foran said. "Consumers are in good shape, delinquencies are now falling, and recoveries are rising," he wrote.

The biggest concern is the possibility of large investment cycle once the acquisition of Discover Financial Services closes, the analyst stated. Management also noted that "they are leaning in on subprime card given credit improvement" and the rise in purchase volume, he added.

Price Action: Shares of Capital One Financialhad risen by 2.26% to $197.58 at the time of publication on Wednesday.

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