Capital One Financial Corp.'s stock was hammered Wednesday after the credit card issuer disclosed that earnings would fall short of analysts' estimates for the second quarter.

The company, based in Falls Church, Va., blamed the earnings slippage on declining fees on past-due card loans. Capital One spokeswoman Diana Sun estimated second-quarter results at around 57 cents per share, as opposed to the Wall Street consensus of 66 cents.

The negative news adds to credit-quality concerns, which have recently beleaguered card issuer stocks.

Earlier in the month, Fitch Investors Service said its credit card performance index-which measures consumer credit quality-reached a new high in delinquencies.

Yet some analysts said Capital One's decline in fees linked to delinquencies suggests that credit card consumers are now borrowing less and hence delinquencies may be stabilizing

Reacting to the Capital One announcement, several analysts cut their earnings estimates Wednesday morning, prompting heavy dumping of its stock. Trading temporarily halted at one point.

The company's stock plummeted 8.78%, one of the biggest daily declines it has endured in the last year. The shares closed at $36.375, down $3.50.

Capital One's price weakness did not appear to affect shares of other credit card issuers. While MBNA Corp. registered a decline, Advanta Corp. tallied a sizable gain.

In the filing, Capital One said that it expects to offset the decline in fee revenues by implementing other fees and continuing to price accounts competitively.

Sensing a buying opportunity, Merrill Lynch & Co. analyst Michael Hughes upgraded Capital One's rating to "intermediate buy" from "intermediate accumulate."

But most credit card industry observers on Wall Street took a cautious approach. Analyst Susan L. Roth of Donaldson Lufkin Jenrette Securities Corp. was among the first to take down her rating.

Ms. Roth acknowledged that a decline in fees related to delinquencies actually bodes well for the Capital One's bottom line, but she warned clients to expect pressure on the company's near-term earnings due to the declines in finance charge revenues and late- and over-limit fee income.

Ms. Roth, who maintained her "buy" rating on the company, lowered her 1997 second-quarter earnings estimates to 58 cents per share from 67 cents per share and lowered her full-year earnings estimates to $2.65 from $2.76 and her 1998 estimate to $3.15 from $3.30.

Analyst Merrill H. Ross of Friedman Billings Ramsey said that the slippage is temporary, but also noted that it may take a long time for the stock to bounce back.

"Margins are down in general, profit margins have been under pressure, and consumers are changing their borrowing habits," said Ms. Ross. "It's harder to sustain growth. The sector has very little appeal from an investor's standpoint."

Analysts at Goldman, Sachs & Co. and Lehman Brothers Inc. also lowered their estimates.

Analyst David West at Davenport & Co., one of the few analysts to maintain his earnings estimates on Capital One, said investors have overreacted.

"I think they will report a respectable quarter because of flexibility in their fee expenses," he said. "In the longer term, declining delinquencies is a positive."

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