Capital One (COF) climbs as investors buy into the Discover vision

Capital One shares rose on Tuesday evening and despite the fact that a extremely noisy second quarter of the company's discovery integration. Nevertheless, we love where the company went with the purchase that changes this game. According to LSEG, the three -month revenue ended on June 30, increased by 31% annually to 12.5 billion dollars in an annual year, and an estimation of consensus of $ 12.7 billion is missing. LSSEG data increased by 75% annually to $ 5.48 and exceeded $ 3.72. Stocks rise to $ 224 per share with an increase of approximately 3% in the extended transaction on Tuesday night. If the stock closes above $ 220.91 on Wednesday, it will celebrate the highest level of all time. As a result, this was not the easiest quarter to judge, but it is easy to see the long -term benefits of having Discover. The acquisition of Blockbuster Discover, which closed on May 18, required many different accounting treatment, and analyst forecasts were on the entire board of directors. For example, Capital One has reported a large profit of $ 5.48 per share on a basis for eliminating one-time impact from the agreement, based on the acceptable accounting principles (GAAP) in general, based on acceptable accounting principles (GAAP). One of the biggest financial impacts of the agreement was the first allowance of $ 8.8 billion for Discover's unintentional credit. The accounting treatment for Discover's business book is caused by a significant increase for the reported company -wide loan losses. The provisions of credit losses are the funds that Capital One has left aside to meet potential credit defaults; The higher the provisions, the worse sign of credit quality. Supporting the provisions of the discovery tells a different story. If there were still an independent company, the Capital One would have a appropriation version of approximately 900 million dollars, which is a major sign of improving credit trends. This is a big difference to say at least. Capital One Financial Finance: Capital One's acquisition of Discover is a transforming agreement with significant strategic advantages and financial benefits. Furthermore, it goes to a few billions of dollars worth of dollars and a net synergy, which should make this agreement extremely sensitive to earnings per share. Finally, the purchase strengthens the balance sheet of Capital One, allowing them to receive aggressive stocks in the future. Competitors: American Express, MasterCard, Visa latest Purchasing: May 23, 2025 Start: 6 March 2025 Beyond the Nitty courage of credit metrics, the focal point of the call for earnings on Tuesday night, the Discover Integration and the largest part of the 35 -$ 35 Million gain. As CEO Richard Fairbank proudly pointed out, "There are only two banks in the world and we are one of them. We benefit from this rare and valuable opportunity." American Express is the other. Our thesis is that Discover acquisition will increase Capital One's earnings and expand a large number of earnings from the price. As the integration begins, the stock remains worthless. Although Capital One has to invest in an aggressive way to achieve its vision, these returns should be worth the costs and help the company to grow for years in a sustainable way. We reiterate our $ 250 purchasing equivalent 1 rating and price target. From the perspective of a call for earnings, the company provided some early thoughts about how integration progresses. In general, the integration "makes a great start" and it is nice to hear it because it contributes to this agreement. However, the management expects the integration costs to be "a little higher" than the previously announced $ 2.8 billion target, which is a slightly negative development. According to Fairbank, the "integration budget" covers costs such as agreements; To carry Discover to the technology of Capital One; Integration of product and experience; Additional investments in risk management and compatibility; To integrate the ability; and take care of employees. In addition to the higher cost appearance, the "Continuous Investment" statement appeared several times in the conference meeting. Fears of eternal expenditure to make the agreement may scare some investors. However, the firm believes that these continuous investments will lead to continuous growth and stronger returns in the long run. "The Opportunities Portfolio is the widest and greatest set of opportunities I have seen in our history. But the only way to go there is investment." He said. "I think there's the opportunity to create a lot of value, but we'll invest in a significant investment to get there." On the synergy side, Capital One said it is on the way to achieve a $ 2.5 billion -dollar net synergy target, consisting of cost savings and income synergies produced by moving bank business and some credit jobs to Discover Network. Fairbank said Capital One started the process of re -publishing Capital One debt cards last month. The transformation process will continue in stages until the beginning of 2026 ". In the longer term, the company sees an important opportunity to invest in the network in order to obtain more international admission and to create a global network brand. The management wants to do this to attract larger expenses to Discover Network, and doing so said that the company can help overcome the synergy goals. As mentioned earlier, the real three -month results were difficult to evaluate against expectations, because the estimates themselves changed tremendously. Analysts need time to make a fine -tuning of their models for the United Company. For this reason, we do not put much stock in all red in the graph above. The view of a decline in Capital One is that tariff -guided dive in consumer emotions will harm the economy and significantly affect Capital One's credit performance. Capital One is the first person to feel the pain of an economic slowdown, since it is one of the credit card companies that are more exposed to subprime. Nevertheless, the bank's loan performance has recovered in a healthy and stable way. "Capital One's card defaults have been healed on a seasonally adjusted basis since October last year, and our losses have healed since January 2025," Fairbank said. He said. Capital One's "Old" Domestic Card portfolio, which does not include Discover, has increased the net paid wage rate to 55%each year to 55%. Clear accusations cannot be collected by a bank's debt amount, and express the amount of minus healing. A fall is a good thing. Towards the end of his call on Tuesday night, Fairbank spoke more generally about the health of the US consumer and the health of his economy and hit an optimistic tone. "If we don't read the news and look at what our customers say to us with their behavior, this is a power picture." As for the procurement, the company returned the share of $ 150 million in a quarter and brought the total year total to $ 300 million. Following another successful federal reserve stress test in June, there are many potential for years of billion -dollar reputation. However, the management is still working on the internal modeling of the United Company and planning to make an update after completion. (Jim Cramer's philanthropic trust is Long Cof. See here for the full list of stocks.) By subscribing to Jim Cramer and CNBC Investment Club, you will receive a trade warning before Jim makes a trade. 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