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Capital One’s Q2: Expectations Amid Trade Wars, Improved Economy

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Jul. 16 2018, Updated 10:04 a.m. ET

Expected earnings

Capital One Financial (COF) is expected to release its second-quarter earnings on July 19. The strong US economy, the May jobs report, and increased consumer spending could drive its second-quarter results. However, a lower demand for corporate loans could impact the results.

Wall Street analysts expect the company to post EPS of $2.68 in the second quarter, implying a YoY (year-over-year) rise of 38.1%. In the first quarter, it posted EPS of $2.62.

Capital One’s competitors (IYF) Discover Financial Services (DFS), American Express (AXP), and Mastercard (MA) are expected to report EPS of $1.88, $1.82, and $1.54, respectively, in the second quarter.

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YoY growth in revenues

In the second quarter, Capital One is expected to report revenues of $6.95 billion, which reflects a growth of 3.7% YoY. Its credit card segment had total net revenues of $4.41 billion in the first quarter, which represents 64% of its total net revenues.

The credit card segment’s net revenues could rise sequentially in the second quarter, primarily due to higher customer spending as a result of an improved economy.

Capital One’s consumer banking segment generated total net revenues of $1.78 billion in the first quarter, which represents 26% of the company’s total net revenues. In the current quarter, higher loans could help the segment have net interest income, which could boost its total net revenues.

In the first quarter, Capital One’s commercial banking segment had total net revenues of $723 million, which account for 10% of the company’s total net revenues. The segment could witness the negative impact of lower taxes and rising US-China trade wars in the current quarter. Trade tensions might reduce corporate spending, and lower taxes could result in a lower demand for corporate loans.

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