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What's in Store for Synchrony Financial's (SYF) Q2 Earnings?

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Synchrony Financial (SYF - Free Report) is scheduled to release second-quarter 2022 results on Jul 18, before the opening bell.

Q2 Estimates

The Zacks Consensus Estimate for SYF's second-quarter earnings per share is pegged at $1.47, which indicates a decline of 30.7% from the prior-year quarter.

The consensus mark for revenues stands at $3.7 billion, suggesting a 10.8% growth from the year-ago quarter.

Earnings Surprise History

Synchrony Financial boasts an impressive earnings surprise history. Its bottom line beat estimates in each of the trailing four quarters, the average surprise being 17.51%. This is depicted in the chart below:

Synchrony Financial Price and EPS Surprise

Synchrony Financial Price and EPS Surprise

Synchrony Financial price-eps-surprise | Synchrony Financial Quote

Factors to Note

Net interest income of Synchrony Financial is likely to have benefited from higher interest and fees, owing to better average loan receivables in the second quarter. Lower interest expenses might have contributed to net interest income growth. The Zacks Consensus Estimate for net interest income is pegged at $3.7 billion, which indicates a rise of 10.3% from the prior-year quarter’s reported figure.

Strong growth across the diversified value, digital, health and wellness and home and auto platforms are likely to have driven purchase volumes of SYF in the to-be-reported quarter. Meanwhile, solid purchase volume, coupled with little moderation of payment rate, is likely to have resulted in loan receivables growth in the second quarter.

However, higher purchase volume might have led to elevated loyalty costs, which may lower other income (comprising mainly interchange revenue, debt cancellation fees and loyalty programs) of the company. The consensus mark for other income stands at $85 million, suggesting a decline of 4.5% from the year-ago quarter’s reported number.

A varied suite of flexible financing options is expected to have contributed to new accounts growth in the to-be-reported quarter. Meanwhile, sound delinquency trends exhibited by SYF’s portfolio might have led to an improvement in its net charge-off rate.

The Zacks Consensus Estimate for net charge-offs (as a percentage of average loan receivables) stands at 2.98%, which indicates an improvement of 59 basis points (bps) year over year. The consensus mark for efficiency ratio for the second quarter is pegged at 38.55%, suggesting a decline of 105 bps year over year.

The margins of Synchrony Financial might have taken a hit due to continuous investments undertaken in boosting digital capabilities and product suite, which may be in the form of loyalty, technology or marketing expenditures.

Additionally, SYF’s other expenses may have remained elevated due to increased employee, and marketing and business development costs. Management anticipates the “other expense” metric to be around $1.05 billion in the second quarter.

What Our Quantitative Model Unveils

Our proven model does not conclusively predict an earnings beat for Synchrony Financial this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that's not the case here.

Earnings ESP: Synchrony Financial has an Earnings ESP of -5.14% because the Most Accurate Estimate of $1.39 is pegged lower than the Zacks Consensus Estimate of $1.47. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Zacks Rank: SYF currently carries a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here.

Stocks to Consider

While an earnings beat looks uncertain for Synchrony Financial, here are some companies from the Finance space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:

Carter Bankshares, Inc. (CARE - Free Report) has an Earnings ESP of +5.41% and a Zacks Rank #1, currently. The Zacks Consensus Estimate for CARE's second-quarter 2022 earnings is pegged at $1.62 per share, which indicates an increase of 51.4% from the prior-year quarter.

Carter Bankshares beat earnings estimates in two of the trailing four quarters and missed the same twice.

Essex Property Trust, Inc. (ESS - Free Report) has an Earnings ESP of +0.81% and a Zacks Rank of 2 at present. The Zacks Consensus Estimate for ESS's second-quarter 2022 earnings stands at $14.17, suggesting growth of 13.5% from the prior-year quarter's reported figure.

Essex Property Trust beat earnings estimates in each of the trailing four quarters.

Midland States Bancorp, Inc. (MSBI - Free Report) has an Earnings ESP of +1.57% and a Zacks Rank of 3. The Zacks Consensus Estimate for MSBI's second-quarter 2022 earnings is pegged at $3.76, which indicates an improvement of 3% from the prior-year reported number.

Midland States Bancorp beat earnings estimates in two of the trailing four quarters and missed the same twice.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.