Ahead of the Bell: Capital One shares fall
NEW YORK (AP) — Shares of Capital One slid 7 percent in premarket trading Friday after falling short of Wall Street expectations for the fourth quarter and lowering its revenue forecasts.
Janney Capital Markets stripped the credit card issuer of its 'buy' rating and also lowered its per-share estimates for this year and next.
The company said Thursday after the market closed that its net income grew more than twofold, to $825 million and revenue rose to $5.62 billion from $4.05 billion.
Yet both figures fell well short of projections from analysts that follow the McLean, Va. company.
William Blair analyst Robert Napoli pointed out the combination of lower net interest margins and higher operating expenses. He lowered his earnings per share estimate to $6.30 from $7 in 2013 and to $6.33 from $7.10 in 2014.
Still, Napoli maintained his "market perform" rating and believes that credit quality should remain relatively stable, then pick up in 2014 and 2015. Although the company's earnings are very credit sensitive and could be volatile, he said Capital One has a "quality, low-cost deposit base."
Susquehanna Financial Group went even further and, seeing a buying opportunity, raised its rating on Capital One.
"There are some good things going on, including better (net charge-off) and strong organic card volume," said analyst James Friedman. "We are raising our rating to positive from neutral."
A net charge-off is the difference between the debt owed by customers that were once thought unlikely to be recovered, and the amount that is actually paid later.
Sameer Gokhale of Janney lowered his rating to "neutral," citing lower net interest income than he had previously assumed. He lowered his earnings per share estimates to $6.30 and $6.53 for this year and 2014, respectively, down from his previous forecasts of $6.85 and $7.31.
Shares of Capital One Financial Corp. fell $4.34 to $57.25. Shares have been rising all year and even with the sell-off before the opening bell, remain at the upper range of the company's 52-week range.