Capital One rallies after hours as earnings top estimates

What did Capital One report?

Capital One Financial (NYSE: COF) reported third-quarter results after Tuesday's closing bell. Both earnings per share and revenue came in above the analyst consensus. The consensus is the average forecast of the analysts who cover the company.

Why it matters: The lender said its provision for credit losses decreased. That provision is money a bank sets aside for loans it expects will go unpaid. The company also released part of its loan reserves.

Its net interest margin widened as well. That margin is the gap between what a lender earns on loans and what it pays for its own funding.

How did the shares react?

The stock climbed 4.2% in after-hours trading, reaching $210.00. After-hours trading takes place once the regular session ends, and far fewer buyers and sellers take part. A few large orders can move prices sharply, and such moves often shrink or reverse at the next open.

Earlier, in the regular session, the shares rose 0.9% to close at $201.56. XLF, a fund that holds large financial stocks, gained 1.2% the same day.

Even after Tuesday's gains, the stock closed 21.9% below its 52-week high of $257.94. That high is the top closing price the stock reached over the past year.

What did the company say about Discover?

Chief executive Richard Fairbank pointed to progress in combining Discover with Capital One. "The Discover integration continues to go well and we're making good progress on delivering the expected synergies," he said. Synergies are the savings and other gains a company hopes to get from merging businesses.

Fairbank also said the company keeps investing for long-term growth. The report still showed net charge-offs, which are loans written off as unlikely to be repaid. Whether lower provisions last may depend on how well cardholders keep up with their payments.

What comes next?

What’s next: A test comes when Wednesday's regular session opens at 9:30 a.m. ET. The after-hours move may hold, grow or fade once the full market trades.

The Conference Board releases its consumer confidence survey on Oct. 27. The Federal Reserve announces its next interest-rate decision on Oct. 28 at 2 p.m. ET. Both could shape how investors view card lenders such as Capital One.