It has been about a month since the last earnings report for Synchrony (SYF Quick QuoteSYF - Free Report) . Shares have added about 6% in that time frame, outperforming the S&P 500.

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

Synchrony Financial's Q2 Earnings Beat Mark, Surge Y/Y

Synchrony Financial delivered second-quarter 2021 earnings per share of $2.12, which outpaced the Zacks Consensus Estimate of $1.47 by 44.2%. The bottom line also compares favorably with the year-ago quarter’s report of 6 cents per share, aided by lower expenses.

Results in Detail

The company’s net interest income dipped 2.5% year over year to $3.3 billion in the second quarter due to lower interest and fees on loans.

Its other income dropped 6.3% year over year to $89 million due to higher program loyalty costs from higher purchase volume.

In the quarter under review, loan receivables inched up 0.1% year over year to $78.4 billion.

Deposits were $59.8 billion, down 6.7% from the year-ago quarter.

Provision for credit losses declined 111.6% year over year to ($194) million) owing to reduced reserves and net charge-offs.

Total other expense decreased 3.9% year over year to $948 million, attributable to reduced operational losses.

Sales Platforms Update

Home & Auto period-end loan receivables were up 1% year over year. This was mainly owing to solid home partners and merchants. In the second quarter, interest and fees on loans were down 6% from the year-ago period. Purchase volume increased 25% year over year.

Digital loan receivables rose 2% year over year while purchase volume surged 30% owing to better digitalbased partners. Interest and fees on loans slid 2%.

Diversified & Value period-end loan receivables decreased 5% year over year. In the second quarter, purchase volume soared 51% year over year on the back of lifting government restrictions on retail experiences. Interest and fees on loans were down 14%.

Health & Wellness period-end loan receivables increased 3% while purchase volume surged 53% year over year, riding on better consumer confidence. Interest and fees on loans decreased 2%.

Lifestyle period-end loan receivables and purchase volume rose 9% each on the back of power sports. Interest and fees on loans increased 6% on the back of loans receivables growth.

Financial Position (as of Jun 30, 2021)

Total assets were $92 billion, down 4.7% year over year.

Total borrowings were $13.5 billion, down 16.3% from the level on Jun 30, 2020.

The company’s balance sheet was consistently strong during the reported quarter with total liquidity of $21.2 billion accounting for 23% of its total assets.

While return on assets was 5.3%, the return on equity was 36.5%.

Efficiency ratio was 39.6% in the second quarter of 2021.

Capital Deployment

During the quarter under consideration, Synchrony Financial returned $521 million worth of capital via common stock dividends.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -14.82% due to these changes.

VGM Scores

Currently, Synchrony has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Synchrony has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.