A month has gone by since the last earnings report for Synchrony (SYF Quick QuoteSYF - Free Report) . Shares have lost about 6.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Synchrony 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 Q3 Earnings Beat Estimates, Up Y/Y

Synchrony Financial reported third-quarter 2021 earnings per share of $1.67, which surpassed the Zacks Consensus Estimate by 12.1%. The bottom line more than doubled year over year.

The company’s results benefited on the back of solid growth in new accounts, higher purchase volume and lower expenses.

Results in Detail

The company’s net interest income increased 5.8% year over year to $3.7 billion in the quarter under review, courtesy of uptick in interest and fees on loans.

Other income of $94 million plunged 28.2% year over year due to increased program loyalty costs stemming from a boost in purchase volume.

In the third quarter, loan receivables dipped 2.7% year over year to $76.4 billion.

Deposits amounted to $60.4 billion, reflecting a decline of 4.9% year over year.

Provision for credit losses plunged 97.9% year over year to $25 million due to reduced reserves and net charge-offs.

Total other expenses of $961 million fell 9.9% year over year in the quarter under consideration, attributable to reduced operational losses.

Sales Platforms Update

Home & Auto period-end loan receivables grew 2% year over year in the third quarter. Purchase volume improved 10% year over year owing to consistent sound performances of majority industry segments. Interest and fees on loans remained flat year over year.

Digital loan receivables rose 4% year over year. Meanwhile, purchase volume climbed 21% year over year on the back of robust digital-based partners. Interest and fees on loans increased 6% year over year.

Diversified & Value period-end loan receivables decreased 3% year over year due to higher payment rates. Purchase volume improved 25% year over year in the quarter under review. Interest and fees on loans declined 4% year over year.

Health & Wellness period-end loan receivables grew 5% year over year while purchase volume advanced 10% year over year, thereby highlighting improved consumer confidence to pursue planned procedures. Interest and fees on loans increased 6% year over year.

Lifestyle period-end loan receivables improved 8% year over year in the third quarter, courtesy of power sports strength. Purchase volume inched up 2% year over year. Interest and fees on loans advanced 4% year over year.

Financial Position (as of Sep 30, 2021)

The company exited the third quarter with total assets were $91.9 billion, which fell 3.9% year over year.

Total borrowings of $12.8 billion plunged 19.1% year over year in the quarter under review.

The company’s balance sheet was consistently strong during the reported quarter with total liquidity of $18.4 billion accounting for 20% of its total assets.

Return on assets and return on equity was 4.9% and 32.1%, respectively, for the third quarter.

Efficiency ratio contracted 100 basis points year over year to 38.7%.

Capital Deployment

During the third quarter, Synchrony Financial returned capital worth $1.4 billion in the form of share buybacks of $1.3 billion and common stock dividends of $124 million.
 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 5.37% due to these changes.

VGM Scores

At this time, Synchrony has a subpar Growth Score of D, however its Momentum Score is doing a lot 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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