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Synchrony Financial (SYF) Down 1.5% Since Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Synchrony Financial SYF. Shares have lost about 1.5% in the past month, outperforming the market.

Will the recent negative trend continue leading up to its next earnings release, or is SYF due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Synchrony Financial’s Q4 Earnings Surpass Estimates

Synchrony Financial’s fourth-quarter 2017 earnings per share of 70 cents surpassed the Zacks Consensus Estimate by 11.1%. The bottom line remained flat year over year.

Including the impact of the tax act that resulted in $160 million of additional tax expenses, net earnings totaled $385 million. This reflects 33% decline from the prior-year quarter.

For 2017, earnings per share came at $2.62, down 3.3% from 2016.

Results in Detail

The company’s net interest income increased 8% to $3.9 billion in the fourth quarter, primarily due to strong loan receivables growth. For 2017, net interest income grew 11% to $15 billion from the prior year.

However, other income was down 27% to $65 million, primarily due to higher loyalty program expenses, partially offset by higher interchange revenues.

Loan receivables grew 7% year over year to $82 billion.

Deposits were $56 billion, up 9% from the last-year quarter.

Purchase volume increased 3% from the fourth quarter of 2016 to $37 billion.

Provision for loan losses increased 26% year over year to $1.4 billion due to credit normalization.

Total other expenses increased 6% to $970 million, primarily due to business growth and marketing expenses.

Sales Platforms Update

Retail Card

Interest and fees on loans grew 8% year over year, driven primarily by period-end loan receivables growth of 7%.

Purchase volume growth was 3% and average active account rose 3%.

Loan receivables growth was broad-based across partner programs.

Payment Solutions

Interest and fees on loans rose 10% year over year on the back of period-end loan receivables growth of 8%.

Purchase volume growth was 9%, adjusted to exclude the impact of the hhgregg bankruptcy, and 7% rise in average active account. 

Loan receivables growth was led by home furnishings and automotive.


Interest and fees on loans increased 8% year over year, driven by period-end loan receivables growth of 10%.

Purchase volume growth was 8% and average active account growth was 8%.

Loan receivables growth was led by dental and veterinary.

Financial Position

Total assets as on Dec 31, 2017 was $95.8 billion, up 6.2% year over year.

Total borrowings as on Dec 31, 2017, was $20.8 billion, up 3.2% year over year.

The company’s balance sheet remained strong during the quarter, with total liquidity of $21 billion, or 22% of total assets.

Return on assets was 1.6% and return on equity was 10.5%, including the impact of the tax act.

Efficiency ratio was 30.3% compared with 31.6% in the fourth quarter of 2016, driven by strong positive operating leverage.

Share Repurchase and Dividend Update

In the fourth quarter, the company paid quarterly common stock dividend of 15 cents per share and repurchased $430 million of Synchrony Financial common stock.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. There have been two revisions higher for the current quarter compared to two lower.

Synchrony Financial Price and Consensus


Synchrony Financial Price and Consensus | Synchrony Financial Quote


VGM Scores

At this time, SYF has an average Growth Score of C, though it is lagging a lot on the momentum front with an F. However, the stock was also allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for value investors than growth investors.


SYF has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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