Capital One: Financial Winner
NEW YORK (TheStreet) -- Capital One (COF) was the winner among the largest U.S. financial names on Friday, with shares rising over 2% to close at $56.07.
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."
The KBW Bank Index (I:BKX) rose slightly, to close at 48.84.
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.