Capital One Financial (COF) first quarter earnings were substantially ahead of the Zacks Consensus Estimate, driven primarily by higher-than-expected revenues and a lower provision for loan losses.
Even though a mixed credit quality was not very impressive during the most recent reported quarter, we anticipate continued synergies from the company’s geographic diversification and expense management initiatives. Additionally, the resilience of almost all of its businesses will continue to support the company’s financials.
Our six-month target price of $51.00 equates to 13.9x our earnings estimate for 2010. Combined with the quarterly dividend of $0.05 per share, this target price implies an expected total return of about 19.4% over that period. This is consistent with our Outperform recommendation on the shares.