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Will Rising Costs Affect Synchrony's (SYF) Q2 Earnings?
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Synchrony Financial (SYF - Free Report) is set to report its second-quarter 2023 results on Jul 18, before the opening bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for second-quarter earnings per share of $1.19 suggests a 25.6% decrease from the prior-year figure of $1.60. The consensus mark remained stable over the past week. The consensus estimate for second-quarter revenues of $4.1 billion indicates a 7.7% increase from the year-ago reported figure.
Synchrony beat the consensus estimate for earnings in three of the trailing four quarters and missed once, with the average surprise being 6.6%. This is depicted in the graph below:
Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at SYF’s previous-quarter performance first.
Q1 Earnings Rewind
The consumer financial services company reported adjusted earnings of $1.35 per share for the previous quarter, missing the Zacks Consensus Estimate by 1.5%. The quarterly results suffered from elevated benchmark rates, increased funding liabilities, higher expenses and lower average active accounts.
However, its performance received a boost from robust purchase volume stemming from the solid contributions of its five sales platforms. An expanding loan receivables portfolio also benefited the company.
Despite economic volatilities, consumer spending remained resilient in the early days of the second quarter. Although consumer confidence remained strong throughout the quarter, the spending growth level is expected to have declined in the later part of the quarter. Nevertheless, Synchrony is anticipated to have benefited from higher purchase volume in the second quarter.
Our estimate for Synchrony’s total purchase volumes for the quarter under review indicates an improvement of more than 7% year over year. Moreover, we expect interest and fees on loans to have increased 12.6% year over year in the second 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 are expected to have risen 4.1% year over year in the second quarter.
The financial service provider is expected to have witnessed an increase in Average Interest-Earnings Assets. The consensus estimate indicates a 12% increase in the metric from the year-ago period. The Zacks Consensus Estimate for the efficiency ratio is pegged at 34.43%, suggesting a decline from the prior-year reported figure of 37.70%.
While the above-mentioned factors are likely to have benefited the company in the second quarter, some elements are anticipated to have offset the positives, leading to a year-over-year decline in earnings, making an earnings beat uncertain. Synchrony is expected to have incurred increased employee costs, information processing, professional fees and marketing and business development expenses in the second quarter.
Our estimate for total non-interest expenses for the quarter indicates more than 4% year-over-year growth. Higher expenses are likely to have reduced the margins in the quarter under review. Also, the high interest rate environment is likely to have discouraged some transactions, capping SYF from reaching its potential portfolio growth level.
The Zacks Consensus Estimate for the net interest margin is pegged at 14.99%, down from 15.60% a year ago, while our estimate suggests a net interest margin of 15.25%. The net charge-offs are also likely to have increased significantly in the quarter under 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 has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate currently stands at $1.19 per share, in line with the Zacks Consensus Estimate.
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 Corebridge’s bottom line for the to-be-reported quarter is pegged at 96 cents per share, which witnessed two upward estimate revisions in the past 30 days against none in the opposite direction. The consensus estimate for CRBG’s revenues is pegged at $4.5 billion.
Aon plc (AON - Free Report) has an Earnings ESP of +2.56% and a Zacks Rank of 3.
The Zacks Consensus Estimate for AON’s bottom line for the to-be-reported quarter is pegged at $2.82 per share, indicating 7.2% year-over-year growth. The estimate witnessed three upward estimate revisions in the past week 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 1.6%.
CME Group Inc. (CME - Free Report) has an Earnings ESP of +3.22% and a Zacks Rank of 2.
The Zacks Consensus Estimate for CME Group’s bottom line for the to-be-reported quarter is pegged at $2.11 per share, suggesting a 7.1% year-over-year increase. The estimate witnessed three upward estimate revisions in the past month against none in the opposite direction. CME beat earnings estimates in all the past four quarters, with an average surprise of 2.2%.
Image: Bigstock
Will Rising Costs Affect Synchrony's (SYF) Q2 Earnings?
Synchrony Financial (SYF - Free Report) is set to report its second-quarter 2023 results on Jul 18, before the opening bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for second-quarter earnings per share of $1.19 suggests a 25.6% decrease from the prior-year figure of $1.60. The consensus mark remained stable over the past week. The consensus estimate for second-quarter revenues of $4.1 billion indicates a 7.7% increase from the year-ago reported figure.
Synchrony beat the consensus estimate for earnings in three of the trailing four quarters and missed once, with the average surprise being 6.6%. This is depicted in the graph below:
Synchrony Financial Price and EPS Surprise
Synchrony Financial price-eps-surprise | Synchrony Financial Quote
Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at SYF’s previous-quarter performance first.
Q1 Earnings Rewind
The consumer financial services company reported adjusted earnings of $1.35 per share for the previous quarter, missing the Zacks Consensus Estimate by 1.5%. The quarterly results suffered from elevated benchmark rates, increased funding liabilities, higher expenses and lower average active accounts.
However, its performance received a boost from robust purchase volume stemming from the solid contributions of its five sales platforms. An expanding loan receivables portfolio also benefited the company.
Now let’s see how things have shaped up before the second-quarter earnings announcement.
Q2 Factors to Note
Despite economic volatilities, consumer spending remained resilient in the early days of the second quarter. Although consumer confidence remained strong throughout the quarter, the spending growth level is expected to have declined in the later part of the quarter. Nevertheless, Synchrony is anticipated to have benefited from higher purchase volume in the second quarter.
Our estimate for Synchrony’s total purchase volumes for the quarter under review indicates an improvement of more than 7% year over year. Moreover, we expect interest and fees on loans to have increased 12.6% year over year in the second 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 are expected to have risen 4.1% year over year in the second quarter.
The financial service provider is expected to have witnessed an increase in Average Interest-Earnings Assets. The consensus estimate indicates a 12% increase in the metric from the year-ago period. The Zacks Consensus Estimate for the efficiency ratio is pegged at 34.43%, suggesting a decline from the prior-year reported figure of 37.70%.
While the above-mentioned factors are likely to have benefited the company in the second quarter, some elements are anticipated to have offset the positives, leading to a year-over-year decline in earnings, making an earnings beat uncertain. Synchrony is expected to have incurred increased employee costs, information processing, professional fees and marketing and business development expenses in the second quarter.
Our estimate for total non-interest expenses for the quarter indicates more than 4% year-over-year growth. Higher expenses are likely to have reduced the margins in the quarter under review. Also, the high interest rate environment is likely to have discouraged some transactions, capping SYF from reaching its potential portfolio growth level.
The Zacks Consensus Estimate for the net interest margin is pegged at 14.99%, down from 15.60% a year ago, while our estimate suggests a net interest margin of 15.25%. The net charge-offs are also likely to have increased significantly in the quarter under 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 has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate currently stands at $1.19 per share, in line with the Zacks Consensus Estimate.
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:
Corebridge Financial, Inc. (CRBG - Free Report) has an Earnings ESP of +2.42% and is a Zacks #1 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Corebridge’s bottom line for the to-be-reported quarter is pegged at 96 cents per share, which witnessed two upward estimate revisions in the past 30 days against none in the opposite direction. The consensus estimate for CRBG’s revenues is pegged at $4.5 billion.
Aon plc (AON - Free Report) has an Earnings ESP of +2.56% and a Zacks Rank of 3.
The Zacks Consensus Estimate for AON’s bottom line for the to-be-reported quarter is pegged at $2.82 per share, indicating 7.2% year-over-year growth. The estimate witnessed three upward estimate revisions in the past week 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 1.6%.
CME Group Inc. (CME - Free Report) has an Earnings ESP of +3.22% and a Zacks Rank of 2.
The Zacks Consensus Estimate for CME Group’s bottom line for the to-be-reported quarter is pegged at $2.11 per share, suggesting a 7.1% year-over-year increase. The estimate witnessed three upward estimate revisions in the past month against none in the opposite direction. CME beat earnings estimates in all the past four quarters, with an average surprise of 2.2%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.