Capital One: Financial Winner
NEW YORK (TheStreet) -- Capital One
The broad indexes gained, as investors tried to shrug-off a disappointing report form the U.S. Commerce Department, that first-quarter real gross domestic product grew at an estimated annualized pace of 2.2%, slowing from the a 3.0% pace during the fourth quarter. A revised first-quarter GDP growth rate will be announced on May 31, "based on more complete data."
The Commerce Department said that "deceleration in real GDP in the first quarter primarily reflected a deceleration in private inventory investment and a downturn in nonresidential fixed investment that were partly offset by accelerations in PCE and in exports."
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Capital One Financial last week reported first-quarter net income available to common shareholders of $1.4 billion, or $2.74 a share, which included a bargain purchase gain of $594 million from the acquisition of ING Direct (USA), as well as "a $160 million benefit related to the company's sale of Visa stock and subsequent reserve adjustments and the absence of approximately $150 million of unique contra-revenue items recorded in the fourth quarter."
Guggenheim Securities analyst Marty Mosby estimated that Capital One's "earnings power rebounded to $1.46" during the first quarter, "as the ING Direct acquisition was accretive, asset quality trends began to improve--further pushing
Mosby expects that "the second quarter should benefit even more, as ING Direct will have been a part of COF for the entire quarter, and approximately $40 billion in excess liquidity will be deployed into the acquisition of the HSBC credit card portfolio," which will include $30 billion in domestic credit card loans.
Mosby rates Capital One a "Buy," with a $67 price target, an estimates the company will earn $5.86 a share during 2012, followed by 2013 EPS of $7.21.
Capital One's shares have now returned 33% year-to-date, following a flat return during 2011.
The shares trade for 1.4 times their reported March 31 tangible book value of $39.37, and eight times the consensus 2013 earnings estimate of $6.87, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is $6.37.
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-- Written by Philip van Doorn in Jupiter, Fla.
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