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Bread Financial (BFH) Q1 Earnings, Revenues Top Estimates

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Bread Financial Holdings’ (BFH - Free Report) operating income of $9.08 per share for the first quarter of 2023 beat the Zacks Consensus Estimate by 26.1% and came ahead of our estimate of $4.06. The bottom line more than doubled year over year.

Bread Financial Holdings, Inc. Price, Consensus and EPS Surprise


Behind the Headlines

Revenues increased 40% year over year to $1.3 billion, resulting from higher average loan balances and improved loan yields. The top line beat the consensus estimate by 23.9% and surpassed our estimate of $1.1 billion.

Credit sales of $7.4 billion increased 7%, driven by brand partner additions and growth across brand partners. Average receivables of $19.4 billion were up 17% year over year.

Total interest income increased 13% to $1.1 billion and missed our estimate of $1.2 billion. The net interest margin contracted 40 basis points to 19%.

Total non-interest expenses increased 28% to $544 million, primarily attributable to an increase in compensation and benefit expense and information processing and communication expense as well as card and processing expenses. Our estimate was $399.3 million.  

The delinquency rate of 5.7% deteriorated 160 basis points year over year, while the net loss rate of 7% deteriorated 220 basis points from the year-ago period.

Pre-tax pre-provision earnings increased 4% year over year to $515 million, reflecting profitable growth and continued success with business transformation efforts. Our estimate was $611.8 million.

Financial Update

As of Mar 31, 2023, cash and cash equivalents were $3.6 billion, down 7.2% from the 2022 level.

At quarter-end, long-term debt and other debt was down 1.2% from 2021-end to $1.9 billion.

Tangible book value of $38.44 per share as of Mar 31, 2023 improved 30.7% over 2022 end.

Cash from operations decreased 19.9% year over year to $398 billion. Capital expenditure at Bread Financial decreased 52.2% year over year to $11 million in the same period.

Dividend Update

The board of directors approved a quarterly dividend of 21 cents to be paid out on Jun 16 to stockholders of record as of May 12.

2023 Guidance

Management estimates average receivables growth in the mid-single-digit range from the 2022 level.

Total revenue growth is expected to be closely aligned with average loan growth. Net interest margin is expected to remain similar to 19.2% in 2022.

Total non-interest expenses are expected to reflect positive operating leverage.

Total expenses will increase, given the ongoing investment in technology modernization, digital advancement, marketing, and product innovation, along with strong portfolio growth.

The net loss rate is guided at about 7%.

Zacks Rank

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

Performance of Other Industry Players

Mastercard Incorporated (MA - Free Report) reported first-quarter 2023 adjusted earnings of $2.80 per share, which beat the Zacks Consensus Estimate by 3.3%. The bottom line inched up 1% year over year. Mastercard’s net revenues climbed 11% year over year to $5,748 million. The top line outpaced the consensus mark by 2.1% and our estimate of $5,616.3 million.

Gross dollar volume or GDV amounted to $2,108 billion in the first quarter, up 15% year over year on a local-currency basis. Cross-border volumes soared 35% year over year on a local-currency basis. Switched transactions rose 12% year over year to 32,464 million.

Management anticipates net revenues to register low-double-digit growth on a year-over-year basis, while operating expenses are estimated to witness mid-single-digit growth in the second quarter of 2023. Management continues to expect net revenue growth in the low-teens range in 2023 from the 2022 figure. Meanwhile, operating expenses are presently forecast to rise in high single digits year over year.

Visa Inc.’s (V - Free Report) second-quarter fiscal 2023 earnings of $2.09 per share beat the Zacks Consensus Estimate of $1.97 by 6.1% and our estimate of $1.92. The bottom line improved 17% year over year. Net revenues of V amounted to $7,985 million, which advanced 11% year over year in the quarter under review. The top line outpaced the consensus mark by 3% and our estimate of $7,596.9 million.

Its payment volume grew 10% year over year on a constant-dollar basis in the fiscal second quarter, while processed transactions (implying transactions processed by Visa) totaled 50.1 billion, up 12% year over year.

Omnicom’s (OMC - Free Report) first-quarter 2023 earnings of $1.56 per share beat the consensus estimate by 13% and our estimates by 11.4%. The bottom line increased 12.2% year over year. Total revenues of $3.4 billion surpassed the consensus estimate by 2.3% and our estimate by 1.4%. The top line of OMC increased 1% year over year.

Across fundamental disciplines, revenues from Advertising & Media were up 5.1%, Precision marketing revenues jumped 7%, Execution & Support revenues increased 3.6% and Commerce and Brand Consulting revenues were up 3.3%.

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