Should Investors Buy Capital One Stock After Crushing Q2 EPS Expectations?

In a busy week that includes quarterly results from Tesla TSLA and Alphabet GOOGL, Capital One (COF) is sharing the spotlight after crushing its Q2 earnings expectations on Tuesday.

With Visa V and Mastercard MA set to release their reports next week, Capital One has set the bar for these major credit card and payment solution providers.

That said, let’s see if it’s time to buy Capital One stock, with it noteworthy that COF is up more than +20% in 2025 and has now soared nearly +100% in the last three years to impressively outperform the broader market, Visa, and Mastercard’s gains of over +60%.  

Capital One’s Strong Q2 Results

Setting Capital One apart from credit card giants like Visa and Mastercard is the company’s focus on consumer and commercial lending. Further boosting Capital One’s consumer and lending endeavors was the completed acquisition of Discover Financial Services in May, which added $2 billion in revenue during Q2 and also expanded its credit card and payment networks footprint.

Overall, Capital One’s Q2 sales soared 31% to $12.49 billion compared to $9.5 billion a year ago and topped estimates of $12.22 billion. More impressive, Q2 earnings skyrocketed 74% to $5.48 per share from EPS of $3.14 in the prior year quarter. Astonishingly, this crushed the Zacks EPS Consensus of $3.83 by 43%, with it noteworthy that Capital One has now surpassed its bottom-line expectations for four consecutive quarters, posting a very impressive average earnings surprise of 23.02%.

Despite reporting a GAAP net loss of $4.3 billion, due to separate one-time charges from the $35.3 billion acquisition of Discover, other Q2 highlights included Capital One’s credit card loans surging 72% to $269.7 billion while deposits rose 27% to $468.1 billion.

Discover’s Loan Boost

Notably, Capital One acquired $98.3 billion of domestic card loans from Discover with what CFO Andre Young said was a net fair value discount of $220 million. Additionally, Capital One acquired $9.9 billion of personal loans with a net fair value discount of $114 million, along with $106.7 billion of deposits with a net fair value discount of $30 million. 

Capital One also acquired $7.9 billion of home loans, which have been marked as held for sale and are now included in its discontinued operations.

Capital One Reconfirms its Full-Year Outlook

Amid the recent Discover acquisition, Capital One still reconfirmed its full-year fiscal 2025 outlook, expecting revenue to increase 36% to $53.29 billion, which came in above the current Zacks Consensus of $52.3 billion. Furthermore, Capital One still expects annual earnings to be up 9% to $15.25 per share, although this was below previous updated expectations of $15.51.

Capital One’s Attractive Valuation

Intriguing to long-term investors is that at 14X forward earnings, Capital One stock still trades nicely beneath the benchmark S&P 500’s 24X. Plus, Capital One trades at an even steeper discount to Visa and Mastercard’s forward earnings multiples of 30X and 34X, respectively.

COF also trades under the optimum level of less than 2X forward sales, while Visa and Mastercard stock trade at more than 17X, with the S&P 500’s average at 5.4X.

Conclusion & Final Thoughts 

While Capital One wasn’t able to raise its full-year guidance after crushing earnings expectations, reconfirming its outlook was still a meaningful sign that the Discover acquisition is paying off. For now, Capital One stock lands a Zacks Rank #3 (Hold) and surely offers long-term value to investors at current levels.

That said, more upside (and a buy rating) will likely depend on what is hopefully a positive trend of earnings estimate revisions for FY26, as FY25 EPS estimates are likely to decline in correlation with the company’s guidance coming in below previous updated projections of $15.51 per share, which had risen over the last 30 days.

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This article originally published on Zacks Investment Research (zacks.com).

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