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Synchrony Financial (SYF) Q4 Earnings Beat Estimates, Up Y/Y

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Synchrony Financial (SYF - Free Report) delivered fourth-quarter 2020 earnings per share of $1.24, which outpaced the Zacks Consensus Estimate by 36.3%. Further, the bottom line improved 7.8% year over year on the back of lower expenses.

Results in Detail

The company’s net interest income plunged 9% year over year to $3.7 billion in the fourth quarter due to the impact of COVID-19 pandemic.

Its other income fell 21% year over year to $82 million due to increased loyalty program costs.

In the quarter under review, loan receivables declined 6% year over year.

Deposits were $62.8 billion, down 4% from the year-ago quarter.

Provision for credit losses declined 32% year over year to $750 million due to reduced net charge-offs, partly offset by a reserve increase of $119 million.

Total other expense slid 7% year over year to $1 billion attributable to reduced purchase volume and accounts, employee costs, and operational losses.

Synchrony Financial Price, Consensus and EPS Surprise

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 declined 13% year over year due to reduced loan receivables and impact of the pandemic.

Loan receivables were down 8% on account of the coronavirus impact, partly offset by growth in digital partners. While purchase volume inched up 1%, the average active account fell 10%.

Payment Solutions

Interest and fees on loans dropped 9% year over year due to reduced yields on loan receivables. Loan receivables dipped 2% year over year due to the impact of the pandemic.

Purchase volume contracted 7%, while average active account fell 9%.

CareCredit

Interest and fees on loans decreased 4% year over year due to fall in merchant discount stemming from reduced purchase volume. Loan receivables were down 7% year over year on account of the coronavirus impact.

While purchase volume decreased 6%, the average active accounts fell 10%.

Financial Position

Total assets as of Dec 31, 2020 were $95.9 billion, down 8.5% year over year.

Total borrowings as of Dec 31, 2020 were $15.8 billion, down 20.6% from the year-ago quarter.

The company’s balance sheet was consistently strong during the reported quarter with total liquidity of $23.7 billion, accounting for 24.7% of total assets.

While return on assets was 3.1%, the return on equity was 23.6%.

Efficiency ratio was 37.1% in fourth-quarter 2020.

Capital Deployment

During the quarter under consideration, Synchrony Financial returned $128 million in capital via common stock dividends.

Recently, the company’s board of directors authorized a share repurchase program of up to $1.6 billion. Beginning in first-quarter 2021, the program runs through Dec 31, 2021.

Full-Year Update

For 2020, the company’s earnings per share of $2.27 surpassed the Zacks Consensus Estimate of $2.02. However, the bottom line plunged 59.2% year over year.

While net interest income for the year declined 14.3% year over year to $14.4 billion, other income improved 9.2% year over year to $405 million. Total other expense fell 4.5% year over year to $4.1 billion.

Zacks Rank

Synchrony Financial carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Finance Sector Releases

Of the finance sector players that reported fourth-quarter results so far, the bottom line of American Express Company (AXP - Free Report) and Discover Financial Services (DFS - Free Report) beat the Zacks Consensus Estimate.

Upcoming Release

Here is a company worth considering from the finance sector as our model shows that this has the right combination of elements to beat on earnings this reporting cycle:

Moody's Corporation (MCO - Free Report) has an Earnings ESP of +2.74% and a Zacks Rank #3 presently.

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