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Capital One (COF) Soars 5%: Is Further Upside Left in the Stock?

Zacks Equity Research
·2 min read

Capital One (COF) shares soared 5% in the last trading session to close at $107.26. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 9.9% loss over the past four weeks.

The performance of financial institutions, specifically banks and financial service providers, is expected to have improved in the second quarter on higher rates and rise in consumer spending. Also, investors are bullish on the sector, given the expectations of the interest rate hikes this year. This possibly led to the optimistic stance by the investors, which drove Capital One higher.

This credit card issuer and bank is expected to post quarterly earnings of $5.11 per share in its upcoming report, which represents a year-over-year change of -33.7%. Revenues are expected to be $8.23 billion, up 11.6% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

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For Capital One, the consensus EPS estimate for the quarter has been revised 0.7% higher over the last 30 days to the current level. And a positive trend in earnings estimate revision usually translates into price appreciation. So, make sure to keep an eye on COF going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Capital One is a member of the Zacks Financial - Consumer Loans industry. One other stock in the same industry, Discover (DFS), finished the last trading session 5.5% higher at $94.42. DFS has returned -14% over the past month.

For Discover , the consensus EPS estimate for the upcoming report has changed +0.8% over the past month to $3.77. This represents a change of -32.1% from what the company reported a year ago. Discover currently has a Zacks Rank of #3 (Hold).


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Zacks Investment Research