Capital One Financial (COF ) shares rose after the company reported a 5.87% net charge-off rate (reported) and 5.75% (managed). Wachovia upgraded the stock to outperform from market perform.
Analyst Joel Houck says he upgrades the stock on improving credit quality and stronger than expected loan growth. He notes in a July 8-K, both metrics showed significant improvement relative to the first and second quarters. He says July's 5.75% managed loss rate is down from 6.20% reported in June. In addition, the company added $1.7 billion of receivables in the first month of the third quarter, more than half of what is needed to reach his third quarter managed portfolio estimate.
Houck raised his EPS estimates from $4.55 to $4.65 for 2003, and from $5.00 to $5.20 for 2004. He set a $52 to $62 valuation range for the stock over the next 12 months.