Capital One shares rose Tuesday evening after the company posted better-than-expected first-quarter profits, driven by beats on credit quality. With the Discover acquisition set to close in less than a month, more gains for the stock could be ahead. Revenue in the three months ended March 31 increased 6.4% year over year to $10 billion, slightly missing the consensus estimate of $10.06 billion, according to LSEG. Adjusted earning per share (EPS) totaled $4.06, exceeding the $3.71 estimate, LSEG data showed. On an annual basis, adjusted EPS increased 26%. Capital One shares jumped about 3 % in after hours trading to around $175 per share. Such a move would extend its week to date gains to about 7.5%. U.S. stock futures also surged Tuesday evening after President Donald Trump said he has ” no intention ” of firing Fed Chair Jerome Powell. The president also acknowledged that tariffs on China will not remain as high as 145%, although the timing of when they could come down was unclear. COF YTD mountain Capital One’s year-to-date stock performance. Bottom line Capital One posted solid first-quarter results and a larger-than-expected reserve release in its credit card business should ease some near-term concerns about its customers’ ability to pay off their balances. More importantly, the business has momentum ahead of the closing of its $35 billion acquisition of Discover . We continue to believe the benefits of this deal to Capital One’s stock will be dual-sided. Not only is it highly accretive to earnings per share through network and expense synergies, but we also argue that it could be price-to-earnings multiple enhancing. For example, Capital One’s soon-to-be vertically integrated business model would look a lot more like American Express , which also owns a payments network like Discover. Shares of American Express trade at about 14.5 times estimated 2026 earnings per share, while COF trades at roughly 9 times forward earnings. We’re not arguing Capital One should trade at the same multiple that American Express does, but there’s a compelling case that the discount should narrow. With the earnings accretion and acceleration in share repurchases from the deal still underappreciated by the market, we reiterate our buy-equivalent 1 rating and price target of $210 a share. We most recently added to our position on Monday. Capital One Financial Why we own it : Capital One’s acquisition of Discover Financial Services is a transformative deal with significant strategic advantages and financial benefits. We expect the deal will create value for merchants, small businesses, and consumers. There are also several billions of dollars worth of expense and network synergies that should make this deal highly accretive to earnings per share. Lastly, the acquisition strengthens Capital One’s balance sheet, allowing for aggressive share repurchases in the future. Competitors : American Express, MasterCard, Visa Most recent buy : April 21, 2025 Initiated…
Read More: Capital One beats on earnings, flexes momentum ahead of closing Discover