Capital One shares rose Tuesday evening despite reporting a highly raucous second-quarter results due to discovery integration. Still, we like the place where the company is heading towards this game-changing acquisition. According to LSEG, revenue for the three months ended June 30th increased 31% year-on-year to $12.5 billion, missing a consensus estimate of $12.5 billion. Adjusted earnings per share (EPS) rose 75% year-on-year to $5.48, exceeding the $3.72 estimate, according to LSEG data. The shares rose about 3% in extended trading on Tuesday night to around $224 per share. On Wednesday, the stock will hit a new all-time high. The conclusion is that this was not the easiest quarter to judge, but the long-term benefits of owning discoveries are easy to see. The acquisition of Blockbuster Discover, which closed on May 18, requires many different accounting treatments, and analyst estimates were made entirely. Capital One, for example, actually reported a quarterly net loss of $4.3 billion, or $8.58 per share, based on the generally acceptable accounting principles (GAAP), but the company made a profit of $5.48 per share on a standard adjusted to remove one-off effects from the transaction. One of the biggest financial impacts from this transaction was the construction of an initial allowance of $8.8 billion for unpurchased credit degradation loans of discovery. Accounting treatment at Discover’s Book of Business is the reason for a significant increase in reported company-wide credit loss provisions. The credit loss provision is the funds Capital One set aside to cover potential loan defaults. The higher the regulations, the worst sign of trust quality. Supporting discovery regulations is a different story. If it was still a standalone company, Capital One would have had an allowance release of around $900 million. This is a great sign that you will improve your credit trend. This is a big difference to say the least. Why own Capital One IT: Capital One discovery acquisition is a transformational deal with important strategic benefits and economic benefits. It also has billions of dollars worth of expenses and network synergy, which means that the transaction must value earnings per share. Finally, the acquisition will strengthen the capital balance sheet and allow for aggressive stock repurchases in the future. Competitors: American Express, MasterCard, Visa Latest Purchases: Starting May 23, 2025: March 6, 2025 Beyond the heart of credit metrics, the focus of Tuesday night’s revenue calls is discovery integration and owning a payment network, the most popular of winning $3.5 billion. As CEO Richard Fairbank proudly pointed out, “There are only two banks in the world that have their own network. We are one of them. American Express is the other. Our paper says that discovery acquisitions will increase capital’s profitability and increase multiple revenues from price. The integration is just beginning, and inventory remains undervalued. Capital One needs to invest aggressively to achieve its vision, but these revenues are only worth the cost and they need to help companies grow sustainably for years. We repeat the $250 buy and price target. The outlook for contracts on revenue calls, the company provided some early thoughts on how discovery integration is progressing. Broadly speaking, integration is “officially off to a great start.” It’s good to hear because many of this contracts have been successful. However, management currently expects the integration costs to be “a little higher” than the previously announced $2.8 billion target. This is a slightly negative development. According to Fairbank, the “integrated budget” covers expenses such as transaction costs. Move your discoveries into Capital One’s tech stack. Integration of product and experience. Additional investments in risk management and compliance. Talent integration; care for employees. In addition to the higher cost outlook, the phrase “sustainable investment” has appeared multiple times in conference calls. The fear of endless spending to make a transaction work can scare some investors. However, the company believes these sustained investments will lead to sustained growth and strong long-term returns. “The portfolio of opportunities we have is the widest and largest set of opportunities I’ve seen in history, but the only way to get there is by investing,” Fairbank said. “I think there are many opportunities for value creation, but I’m going to invest a lot to get there,” he added. On the synergistic side, Capital One said it is on track to achieve its $2.5 billion net synergy goal. This consists of the synergy of cost savings and revenue generated by migrating the debit business and some credit businesses into discovery networks. Capital One began the process of reissuing one Capital debt card to its network last month, Fairbank said. The conversion process will continue “by early 2026,” he said. In the long term, the company sees an important opportunity to achieve greater international acceptance and invest in its network to build a global network brand. Management wants to do this and seduce larger spenders into the discovery network, and ultimately doing so will help the company surpass its synergistic goals, Fairbank said. As mentioned earlier, actual quarterly results were difficult to assess expectations, expectations and expectations, as the estimates themselves were vastly diverse. Analysts need time to fine-tune the model of the complex. So we don’t have too many stocks in all the red stocks you see in the chart above. A bearish view on Capital 1 is that a tariff-driven rush involved in consumer sentiment hurts the economy and has a significant impact on capital’s credit performance. Capital One is one of the more exposed credit card companies, so it is usually the first time you feel the pain of slowing the economy. Still, banks’ credit performance is healthy and steadily improving. “Capital One card delinquency has improved on a seasonally adjusted basis since October last year, and our losses have improved since January 2025,” Fairbank said in a call. Capital One’s “Legacy” domestic card portfolio fell to 5.5% from the previous year, with 55 basis points due to no Discover. A net charge-off is the amount of debt that a bank has written off as unrecoverable, minus recovery. Decline is a good thing. Towards the end of Tuesday night’s call, Fairbank was in a brighter tone, talking more generally about US consumers and economic health. “If we’re not reading the news, if we’re just seeing what our customers are saying to us in their actions, that’s a photo of strength,” he said. Regarding buybacks, the company repurchased $150 million worth of shares in the quarter, bringing its annual total of $300 million. Following another successful round of the Federal Reserve stress test in June, there are plenty of potential for billions of dollars to buy back here. However, management still works with internal modeling for the integrated company and plans to complete the completed update. (Jim Cramer’s Charitable Trust is a long COF. See the full list of stocks here.) As a subscriber to Jim Cramer and CNBC Investing Club, Jim receives a trade warning before he makes a transaction. 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