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Can Higher Expenses Affect Synchrony's (SYF) Q1 Earnings?
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Synchrony Financial (SYF - Free Report) is set to report its first-quarter 2023 results on Apr 19, before the opening bell.
The consumer financial services company reported adjusted earnings of $1.26 per share for the last quarter, beating the Zacks Consensus Estimate by 12.5% on the back of a rising loan receivables portfolio paving the way for higher interest and fees on loans. A growing purchase volume, resulting from increased contributions from its five sales platforms, also contributed to the upside. However, the quarterly results were partly offset by rising benchmark rates, elevated expenses and reduced average active accounts.
The Zacks Consensus Estimate for first-quarter earnings per share of $1.50 suggests a 13.3% decrease from the prior-year reported figure of $1.73, while our estimate stands at $1.36. The consensus mark declined by a penny over the past week. The consensus estimate for first-quarter revenues of $4 billion indicates a 5.9% increase from the year-ago reported figure, while our estimate suggests 2.5% year-over-year growth.
Synchrony beat the consensus estimate for earnings in all the prior four quarters, the average being 10.3%. This is depicted in the graph below:
Synchrony is expected to have benefited from higher purchase volume in the first quarter as consumer spending remained resilient to economic volatilities. Our estimate for total purchase volumes for the quarter under review indicates a year-over-year improvement of 9.8%. Moreover, we expect interest and fees on loans to have increased 10% year over year in the first quarter, boosting the top line.
SYF is expected to have consistently gained from digital sales volume in the to-be-reported quarter. Our estimate and the Zacks Consensus Estimate suggest that the average active accounts in the Home & Auto platform have risen 5.5% year over year in the first quarter.
The financial service provider is expected to have witnessed an increase in Average Interest-Earnings Assets. The consensus estimate indicates a 9% increase in the metric from the year-ago period, while our estimate suggests a 4.6% jump. The Zacks Consensus Estimate for the efficiency ratio is pegged at 35.43%, suggesting a decline from the prior-year reported figure of 37.20%.
While the above-mentioned factors are likely to have benefited the company in the first quarter, some elements are anticipated to have offset the positives, leading to an earnings miss and a year-over-year decline. The company is expected to have incurred increased employee costs, information processing, and marketing and business development expenses in the first quarter.
Our estimate for total non-interest expenses for the quarter indicates 8.5% year-over-year growth. Increased expenses are expected to have reduced the margins in the quarter under review.
The Zacks Consensus Estimate for the net interest margin is pegged at 15.4%, down from 15.8% a year ago, while our estimate suggests a net interest margin of 15.5%. The net charge-offs are likely to have significantly increased in the quarter in review.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Synchrony this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: The company’s Earnings ESP is -4.70%. This is because the Most Accurate Estimate stands at $1.43 per share, lower than the Zacks Consensus Estimate of $1.50.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Synchrony currently carries a Zacks Rank #3.
Stocks to Consider
While an earnings beat looks uncertain for Synchrony, here are some companies from the broader 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:
The Zacks Consensus Estimate for Owl Rock Capital’s bottom line for the to-be-reported quarter is pegged at 43 cents per share, implying a 38.7% jump from the year-ago reported figure. ORCC beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 2.1%.
Aon plc (AON - Free Report) has an Earnings ESP of +1.31% and a Zacks Rank of 3.
The Zacks Consensus Estimate for AON’s bottom line for the to-be-reported quarter is pegged at $5.25 per share, which witnessed two upward estimate revisions in the past 30 days against none in the opposite direction. AON beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 2.1%.
MarketAxess Holdings Inc. (MKTX - Free Report) has an Earnings ESP of +0.26% and a Zacks Rank of 3.
The Zacks Consensus Estimate for MarketAxess’ bottom line for the to-be-reported quarter is pegged at $1.90 per share, suggesting a 9.8% year-over-year increase. MKTX beat earnings estimates in all the past four quarters, with an average surprise of 3.8%.
Image: Bigstock
Can Higher Expenses Affect Synchrony's (SYF) Q1 Earnings?
Synchrony Financial (SYF - Free Report) is set to report its first-quarter 2023 results on Apr 19, before the opening bell.
The consumer financial services company reported adjusted earnings of $1.26 per share for the last quarter, beating the Zacks Consensus Estimate by 12.5% on the back of a rising loan receivables portfolio paving the way for higher interest and fees on loans. A growing purchase volume, resulting from increased contributions from its five sales platforms, also contributed to the upside. However, the quarterly results were partly offset by rising benchmark rates, elevated expenses and reduced average active accounts.
Let’s see how things have shaped up before the first-quarter earnings announcement.
What Do Estimates Say?
The Zacks Consensus Estimate for first-quarter earnings per share of $1.50 suggests a 13.3% decrease from the prior-year reported figure of $1.73, while our estimate stands at $1.36. The consensus mark declined by a penny over the past week. The consensus estimate for first-quarter revenues of $4 billion indicates a 5.9% increase from the year-ago reported figure, while our estimate suggests 2.5% year-over-year growth.
Synchrony beat the consensus estimate for earnings in all the prior four quarters, the average being 10.3%. This is depicted in the graph below:
Synchrony Financial Price and EPS Surprise
Synchrony Financial price-eps-surprise | Synchrony Financial Quote
Factors to Note
Synchrony is expected to have benefited from higher purchase volume in the first quarter as consumer spending remained resilient to economic volatilities. Our estimate for total purchase volumes for the quarter under review indicates a year-over-year improvement of 9.8%. Moreover, we expect interest and fees on loans to have increased 10% year over year in the first quarter, boosting the top line.
SYF is expected to have consistently gained from digital sales volume in the to-be-reported quarter. Our estimate and the Zacks Consensus Estimate suggest that the average active accounts in the Home & Auto platform have risen 5.5% year over year in the first quarter.
The financial service provider is expected to have witnessed an increase in Average Interest-Earnings Assets. The consensus estimate indicates a 9% increase in the metric from the year-ago period, while our estimate suggests a 4.6% jump. The Zacks Consensus Estimate for the efficiency ratio is pegged at 35.43%, suggesting a decline from the prior-year reported figure of 37.20%.
While the above-mentioned factors are likely to have benefited the company in the first quarter, some elements are anticipated to have offset the positives, leading to an earnings miss and a year-over-year decline. The company is expected to have incurred increased employee costs, information processing, and marketing and business development expenses in the first quarter.
Our estimate for total non-interest expenses for the quarter indicates 8.5% year-over-year growth. Increased expenses are expected to have reduced the margins in the quarter under review.
The Zacks Consensus Estimate for the net interest margin is pegged at 15.4%, down from 15.8% a year ago, while our estimate suggests a net interest margin of 15.5%. The net charge-offs are likely to have significantly increased in the quarter in review.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Synchrony this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: The company’s Earnings ESP is -4.70%. This is because the Most Accurate Estimate stands at $1.43 per share, lower than the Zacks Consensus Estimate of $1.50.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Synchrony currently carries a Zacks Rank #3.
Stocks to Consider
While an earnings beat looks uncertain for Synchrony, here are some companies from the broader 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:
Owl Rock Capital Corporation has an Earnings ESP of +0.47% and is a Zacks #2 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Owl Rock Capital’s bottom line for the to-be-reported quarter is pegged at 43 cents per share, implying a 38.7% jump from the year-ago reported figure. ORCC beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 2.1%.
Aon plc (AON - Free Report) has an Earnings ESP of +1.31% and a Zacks Rank of 3.
The Zacks Consensus Estimate for AON’s bottom line for the to-be-reported quarter is pegged at $5.25 per share, which witnessed two upward estimate revisions in the past 30 days against none in the opposite direction. AON beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 2.1%.
MarketAxess Holdings Inc. (MKTX - Free Report) has an Earnings ESP of +0.26% and a Zacks Rank of 3.
The Zacks Consensus Estimate for MarketAxess’ bottom line for the to-be-reported quarter is pegged at $1.90 per share, suggesting a 9.8% year-over-year increase. MKTX beat earnings estimates in all the past four quarters, with an average surprise of 3.8%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.