Shares of Capital One dipped on Thursday evening after the credit card issuer’s fourth-quarter earnings per share missed estimates due to higher expenses. The results don’t change our positive view of where the company is headed. Revenue in the fourth quarter ended Dec. 31 increased 53% year over year to $15.62 billion, beating the $15.48 billion consensus estimate of analysts surveyed by LSEG. Adjusted earnings per share increased 25% year over year to $3.86, missing the $4.11 estimate, LSEG data showed. Bottom line For the first time since starting our Capital One position last March, the company missed earnings estimates. There was a slightly larger-than-expected increase in provisions for credit losses, but the company’s credit metrics were generally solid and in line with seasonality. Provisions for credit losses are funds that Capital One sets aside to cover potential loan defaults; the higher the provisions, the worse the credit quality signal. But we’re not seeing any red flags. It was another quarter in which Capital One made progress on its $35 billion acquisition of Discover. The integration is still in its early stages, but everything looks to be on track. Capital One began migrating its debit cardholders to the Discover network last August, and CEO Richard Fairbank said on the call that the conversion is nearly complete. On the credit side, management expects to move over some of these volumes early next year. And in the background, Capital One is working to increase Discover’s international acceptance and strengthen its network brand. While this is happening, Capital One announced this evening that it is buying Brex, a fintech company, for $5.15 billion. More on this later. One more item to note is the company’s reaction to President Donald Trump’s proposed 1-year cap on credit card interest rates at 10%. Many bank executives, including JPMorgan’s Jamie Dimon , have expressed concerns about this plan. Fairbank was no fan either, saying a cap would make credit much less available for consumers. He predicted a cap on rates “would catalyze a number of unintended consequences.” A rate cap on credit cards requires congressional approval. One possible solution is to create special products that meet the cap. COF 1Y mountain Capital One 1-year return Capital One stock is down about 3% to $227 in after-hours trading, but our long-term thesis remains intact. We’ve long believed the Discover acquisition will improve Capital One’s earnings power and help re-rate its price-to-earnings multiple as the business model evolves to more closely resemble American Express . The Brex deal was a surprise, but it makes the company look even more like AmEx. Capital One currently trades at roughly 11.3 times 2026 EPS estimates, while American Express trades at about 21 times. We’re not calling for parity, but a slightly higher multiple for Capital One would get us closer to our $270 price target. That said, we may not be ready to repurchase the 60…
Read More: Capital One’s mixed quarter doesn’t change our view on its budding