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MarketPulse: Capital One Loses Its Street Cred Amid 'Confidence Shaking' Results

Published 01/23/2019, 01:14 PM
Updated 01/23/2019, 01:30 PM
© Reuters.

Investing.com - Capital One slumped, dragging financials lower, after it delivered quarterly results that spooked the sell-side community.

Capital One Financial (NYSE:COF), on Tuesday after the close, reported fourth-quarter earnings of $1.87 a share on $7 billion in revenue, missing expectations for earnings of $2.38 a share and $7.08 billion. Its shares fell 5.6%.

The results prompted bearish calls from analysts as Nomura lowered its price target on company's stock to $90 and said the results were "confidence shaking," citing disappointing revenue growth and elevated expenses.

Oppenheimer downgraded its investment rating on Capital One to perform from outperform.

"We find it less likely investors see the outsized benefits from pent-up account growth and funding cost reduction in the near term," Oppenheimer said.

But financial services company Synchrony Financial (NYSE:SYF) was rewarded for delivering above-consensus fourth-quarter results and revealing that it had extended its relationship with Walmart (NYSE:WMT). Its share price soared 11%.

For the fourth quarter, earnings increased to $1.09 a share on $4.40 billion in revenue, well above analysts' estimates for earnings of $0.92 a share on $4.28 billion in revenue.

Synchrony said it extended its partnership with Walmart's Sam's Club and reached an agreement to sell the Walmart loan portfolio that it currently services. Walmart has agreed to dismiss a lawsuit against Synchrony.

Some on Wall street, however, remained bearish.

"We agree these are positives for Synchrony, but they do not contradict our expectations of slowing spending and deteriorating credit in 2019, which we think will weigh on shares," said CFRA, an independent research provider.

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The Financial Select Sector SPDR (NYSE:XLF) ETF was down 0.5%.

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