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Synchrony Financial’s (SYF - Free Report) second-quarter 2020 earnings per share of 6 cents per share beat the Zacks Consensus Estimate by 50%. However, the bottom line plunged 95.9% year over year due to muted revenues.
Results in Detail
The company’s net interest income decreased 18% to $3.4 billion in the second quarter due to the impact of the Walmart consumer portfolio sale and the COVID-19 pandemic.
However, its other income increased 6% to $95 million, mainly attributable to lower loyalty program expenses.
In the quarter under review, loan receivables dipped 4% year over year.
Deposits were $64.1 billion, down 2% from the year-ago quarter.
Provision for credit loss increased 40% year over year to $1.7 billion due to Walmart-related prior-year reserve reduction and a hike in reserve induced by COVID-19 related losses.
Total other expense fell 7% year over year to $73 million owing to Walmart-related cost reductions, decline in purchase volume and accounts along with decrease in various discretionary spend. However, the same was partly offset by increased operational losses and costs related to the COVID-19 impact as well as charitable expenses.
Synchrony Financial Price, Consensus and EPS Surprise
The company’s interest and fees on loans fell 22% year over year due to the sale of the Walmart consumer portfolio and lower loan receivables. Loan receivables were down 4% due to COVID-19 impact while the average active accounts declined 18%.
Payment Solutions
Interest and fees on loans dropped 8% year over year due to lower late fees. Loan receivables slid 3% year over year.
Purchase volume contracted 19% while average active account slipped 3%.
CareCredit
Interest and fees on loans decreased 4% year over year due to fall in merchant discount as a result of shrinkage in purchase volume.
Loan receivables were down 5% year over year due to the coronavirus impact.
While purchase volume decreased 31%, the average active account fell 2%.
Financial Position
Total assets as of Jun 30, 2020 were $96.5 billion, down 9.3% year over year.
Total borrowings as of Jun 30, 2020 were $16 billion, down 24.4% from the year-ago quarter.
The company’s balance sheet was consistently strong during the reported quarter with total liquidity of $28 billion reflecting 29% of the total assets.
While return on assets was 0.2%, the return on equity was 1.6%.
Efficiency ratio was 36.3% in the second quarter of 2020.
Capital Deployment
During the quarter under consideration, the company returned $128 million in capital through common stock dividends.
Zacks Rank
Synchrony Financial carries a Zacks Rank #4 (Sell).
Some stocks worth considering from the finance sector with a perfect mix of elements to surpass estimates in the upcoming quarterly releases are as follows:
Sun Life Financial Inc. (SLF - Free Report) has an Earnings ESP of +1.22% and a Zacks Rank #3 (Hold), currently. The company is scheduled to release second-quarter earnings on Aug 6.
Moodys Corporation (MCO - Free Report) is set to report second-quarter earnings on Jul 29. The stock has a Zacks Rank of 3 and an Earnings ESP of +7.17% at present.
American Financial Group, Inc. (AFG - Free Report) is slated to announce second-quarter earnings on Aug 4. The stock has an Earnings ESP of +21.45% and is presently Zacks #3 Ranked.
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Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021. Click here for the 6 trades >>
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Synchrony Financial's (SYF) Q2 Earnings Beat, Tumble Y/Y
Synchrony Financial’s (SYF - Free Report) second-quarter 2020 earnings per share of 6 cents per share beat the Zacks Consensus Estimate by 50%. However, the bottom line plunged 95.9% year over year due to muted revenues.
Results in Detail
The company’s net interest income decreased 18% to $3.4 billion in the second quarter due to the impact of the Walmart consumer portfolio sale and the COVID-19 pandemic.
However, its other income increased 6% to $95 million, mainly attributable to lower loyalty program expenses.
In the quarter under review, loan receivables dipped 4% year over year.
Deposits were $64.1 billion, down 2% from the year-ago quarter.
Provision for credit loss increased 40% year over year to $1.7 billion due to Walmart-related prior-year reserve reduction and a hike in reserve induced by COVID-19 related losses.
Total other expense fell 7% year over year to $73 million owing to Walmart-related cost reductions, decline in purchase volume and accounts along with decrease in various discretionary spend. However, the same was partly offset by increased operational losses and costs related to the COVID-19 impact as well as charitable expenses.
Synchrony Financial Price, Consensus and EPS Surprise
Synchrony Financial price-consensus-eps-surprise-chart | Synchrony Financial Quote
Sales Platforms Update
Retail Card
The company’s interest and fees on loans fell 22% year over year due to the sale of the Walmart consumer portfolio and lower loan receivables.
Loan receivables were down 4% due to COVID-19 impact while the average active accounts declined 18%.
Payment Solutions
Interest and fees on loans dropped 8% year over year due to lower late fees. Loan receivables slid 3% year over year.
Purchase volume contracted 19% while average active account slipped 3%.
CareCredit
Interest and fees on loans decreased 4% year over year due to fall in merchant discount as a result of shrinkage in purchase volume.
Loan receivables were down 5% year over year due to the coronavirus impact.
While purchase volume decreased 31%, the average active account fell 2%.
Financial Position
Total assets as of Jun 30, 2020 were $96.5 billion, down 9.3% year over year.
Total borrowings as of Jun 30, 2020 were $16 billion, down 24.4% from the year-ago quarter.
The company’s balance sheet was consistently strong during the reported quarter with total liquidity of $28 billion reflecting 29% of the total assets.
While return on assets was 0.2%, the return on equity was 1.6%.
Efficiency ratio was 36.3% in the second quarter of 2020.
Capital Deployment
During the quarter under consideration, the company returned $128 million in capital through common stock dividends.
Zacks Rank
Synchrony Financial carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Upcoming Releases From Finance Sector
Some stocks worth considering from the finance sector with a perfect mix of elements to surpass estimates in the upcoming quarterly releases are as follows:
Sun Life Financial Inc. (SLF - Free Report) has an Earnings ESP of +1.22% and a Zacks Rank #3 (Hold), currently. The company is scheduled to release second-quarter earnings on Aug 6.
Moodys Corporation (MCO - Free Report) is set to report second-quarter earnings on Jul 29. The stock has a Zacks Rank of 3 and an Earnings ESP of +7.17% at present.
American Financial Group, Inc. (AFG - Free Report) is slated to announce second-quarter earnings on Aug 4. The stock has an Earnings ESP of +21.45% and is presently Zacks #3 Ranked.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Click here for the 6 trades >>