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Capital One Financial Corp., SLM Corp., Bank of America Corp., Discover Financial Services and General Mills Inc.

^{Published on 2009-12-18 14:35:39 - Market Wire}
 

CHICAGO--([ BUSINESS WIRE ])--Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Capital One Financial Corp. (NYSE: [ COF ]), SLM Corp. (NYSE: [ SLM ]), Bank of America Corp. (NYSE: [ BAC ]), Discover Financial Services (NYSE: [ DFS ]) and General Mills Inc. (NYSE: [ GIS ]).

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Here are highlights from Thursday's Analyst Blog:

Capital One Default Rates Up Risk

On Tuesday, the third-largest issuer of Visa credit cards, Capital One Financial Corp. (NYSE: [ COF ]) stated a rise in its net annual charge-off rate to 9.60% in Nov 2009 from 9.04% in Oct 2009. The statement came as a Securities and Exchange Commission (SEC) filing, thereby signifying its continuous credit card quality deterioration and payment failures.

The charge-off rate is the percentage of default loans compared to total loans of the company. Additionally, the rate for loans at least 30 days delinquent rose significantly to 5.87% in Nov 2009 from 5.72% in Oct 2009.

Although the charge-off rate in the auto-loan segment of the company fell from 4.32% in Oct to 3.67% in Nov 2009, the delinquency rate ascended to 9.57% from 9.30% in Nov 2009.

However, the non-U.S. position appeared to be marginally better. According to the SEC filing, Capital One's charge-off rate for international card operations was flat at 9.50%, marginally up from 9.49%. The international delinquency rate was slightly down to 6.60% from 6.67%.

We believe the adverse trend of the charge-off ratio has accelerated in the recent quarters and is anticipated to continue at least through the first quarter of 2010. Cyclical factors such as the ongoing financial crisis across economies, weak capital markets, job losses and rising unemployment issues have contracted the consumers' debt-paying capacity. We don't expect any significant improvement on this front anytime soon.

Although the market condition may stabilize by mid to end of fiscal 2010, any recovery in the credit business is likely to be hampered by the enactment of the new Credit Cardholders Bill of Rights Act in the U.S. and other restrictive regulatory measures in the U.K. and European Union. Nevertheless, these economic and government regulatory issues are also taking a toll on the profitability of Capital One's peers such as SLM Corp. (NYSE: [ SLM ]), Bank of America Corp. (NYSE: [ BAC ]) and Discover Financial Services (NYSE: [ DFS ]), to name a few.

General Mills Beats, Raises

General Mills Inc. (NYSE: [ GIS ]) reported strong results for the second quarter of fiscal 2010, with earnings of $1.54 per share. Earnings were well above the Zacks Consensus Estimate of $1.45 and up 13.3% year-over-year. Profits were driven by lower commodity costs and strong demand for the company's products.

Net sales for the quarter grew marginally – 1.7% year-over-year -- attributable to a 16% decline in the Bakeries and Foodservice segment. In addition, divestiture had a 2% unfavorable impact on the top line and pound volume was flat year-over-year. This was partially offset by 3.8% growth in the U.S. Retail segment, 7.1% growth in the International segment and a 1% positive impact from foreign currency.

Segment wise: the U.S. Retail segment posted a 3.8% increase, reflecting strong growth in the Big G cereals, Meals division, Pillsbury, Yoplait yogurt and Snacks categories. Pound volume contributed 2% to top-line growth.

The International segment reported a 7.1% increase in revenues, primarily due to foreign currency translations. In addition, net price realization and mix contributed 3% to the top line. However, pound volumes were flat year-over-year.

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