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Synchrony Financial (SYF) Beats on Q2 Earnings, Revenues

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Synchrony Financial (SYF - Free Report) is one of the nation’s premier consumer financial services companies that offers a wide range of credit products through a diverse group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and health and wellness providers.

Synchrony Financial has been witnessing strong revenue growth on the back of both organic and inorganic strategies. Acquisition of Citi Health Card portfolio and GPShopper in the first quarter of 2017, significantly added to the company’s top line. The company has been continuously investing in technologically in order to upgrade its offerings. Synchrony Financial has been aggressively forming strategic alliances in order to strengthen its position in the market.

CareCredit, an unit of Synchrony Financial is a leading provider of promotional financing to consumers for health and personal care procedures, products or services. In addition, the company’s consistent cash flow generation has substantially supported its capital deployment activities aimed at enhancing shareholders’ value.

However, Synchrony Financial has been witnessing a steep rise in its expenses for long. Increasing allowance for loan losses as well as rising fraud related losses remain major areas of concern.

Despite having a solid earnings track record, and delivering positive earnings surprises in three of the last four quarters, it records an average miss of 14.2%.

Currently, Synchrony Financial has a Zacks Rank #3 (Hold), but that could definitely change following the company’s earnings report which was just released. You can see the complete list of today’s Zacks #1 Rank stocks here

We have highlighted some of the key stats from this just-revealed announcement below:

The Bottom Line: Synchrony Financial beats on earnings. Our consensus called for EPS of 58 cents and the company reported earnings per share of 61 cents.  EPS rose 5.1% year over year.

Synchrony Financial Price and EPS Surprise

The Top Line: Net revenues, in terms of net interest income also surpassed expectations. Synchrony Financial posted operating revenues of $3.64 billion, where as our consensus estimate of $3.58 billion. Revenues also increased 13% year over year.

Key Stats: Provision for loan losses increased 30% to $1,326 million over the prior year quarter.

Net interest margin increased 26 basis points to 16.20%

Return on assets was 2.2% and return on equity was 13.8%.

Efficiency ratio was 30.1%, compared to 31.9% in the second quarter of 2016, driven by strong positive operating leverage.

Other expense increased 8.6% to $911 million, primarily driven by business growth.

Check back later for our full write up on this SYF earnings report later! 

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