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Bread Financial (BFH) Q2 Earnings Top, Revenues Miss Estimates
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Bread Financial Holdings’ (BFH - Free Report) operating income of $1.27 per share for the second quarter of 2023 beat the Zacks Consensus Estimate by 452.2%. The bottom line increased more than fivefold year over year.
Bread Financial Holdings, Inc. Price, Consensus and EPS Surprise
Revenues increased 6.6% year over year to $952 million on higher average loan balances and improved loan yields. The top line however missed the consensus estimate by 1.4%.
Credit sales of $7.1 billion decreased 13%, reflecting the sale of the BJ's Wholesale Club portfolio in late February 2023, credit tightening and moderating consumer spending, partially offset by new partner growth. Our estimate was also $7.1 billion.
Average loans of $17.7 billion grew 4%, driven by the addition of new partners as well as further moderation in the consumer payment rate, partially offset by the sale of the BJ's portfolio. Our estimate was $18.2 billion.
Total interest income increased 12% to $1.2 billion and missed our estimate of $1.3 billion. The net interest margin expanded 10 basis points to 18.7%.
Total non-interest expenses more than doubled to $530 million, primarily attributable to an increase in compensation and benefit expense, information processing and communication expense as well as card and processing expenses. Our estimate was $640 million.
The delinquency rate of 5.5% deteriorated 110 basis points year over year, while the net loss rate of 8% deteriorated 240 basis points from the year-ago period.
Pre-tax pre-provision earnings increased 0.5% year over year to $422 million, reflecting profitable growth and continued success with business transformation efforts. Our estimate was $319 million.
Financial Update
As of Jun 30, 2023, cash and cash equivalents were $3.6 billion, down 14.5% from the 2022 level.
At quarter-end, long-term debt and other debt declined 27.3% from 2022-end to $1.4 billion.
Tangible book value of $38.99 per share as of Jun 30, 2023 improved 22.8% year over year.
Cash from operations decreased 0.3% year over year to $741 billion. Capital expenditure at Bread Financial decreased 63.2% year over year to $17 million in the same period.
Capital Deployment
The board of directors approved a new share buyback plan worth $35 million.
The board also approved a quarterly dividend of 21 cents to be paid out on Sep 15 to stockholders of record as of Aug 11.
2023 Guidance
Management estimates average receivables growth in the low to mid-single-digit range from the 2022 level.
Total revenue growth is expected to be slightly above 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. Expenses in the second half of 2023 are expected to be lower than the first half, driven by lower intangible amortization expense and improved operating efficiencies.
The net loss rate is guided in the low-to-mid 7% range.
Of the other Business Services sector industry players that have reported second-quarter results so far, the bottom-line results of The Interpublic Group of Companies, Inc. (IPG - Free Report) , Omnicom Group Inc. (OMC - Free Report) and Equifax Inc. (EFX - Free Report) beat the Zacks Consensus Estimate.
Interpublic Group reported second-quarter 2023 adjusted earnings of 74 cents per share, beating the Zacks Consensus Estimate by 23.3% but declining 17.5% on a year-over-year basis. Net revenues of $2.33 billion missed the consensus estimate by 2.9% and decreased 14.9% on a year-over-year basis.
IPG’s operating income in the quarter came in at $310.7 million, down 11% from the prior-year quarter’s levels. Adjusted EBITA came in at $331.9 million, decreasing 10.3% from the prior-year quarter’s level.
Omnicom’s second-quarter 2023 earnings of $1.81 per share beat the consensus estimate by 0.6% and increased 7.7% year over year. Total revenues of $3.6 billion lagged the consensus estimate by 0.3% but increased 1.2% year over year. Across fundamental disciplines, revenues from Advertising & Media were up 5.1%, compared with our estimated growth of 6.3%. Precision marketing revenues jumped 2.3%, compared with our estimate of 14% growth. EBITA of OMC in the quarter came in at $570 million, up 1.4% year over year.
Equifax reported second-quarter 2023 adjusted earnings of $1.71 per share, beating the Zacks Consensus Estimate by 2.4% but declining 18.2% from the year-ago figure. Total revenues of $1.32 billion missed the consensus estimate by 0.4% while matching the year-ago figure on a reported basis. The top line gained 1% on a local-currency basis.
Revenues in the Workforce Solutions segment of EFX totaled $582.8 million, down 4% from the year-ago quarter’s figure. Adjusted EBITDA in the second quarter totaled $431.3 million, down 30% from the year-ago quarter’s level.
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Bread Financial (BFH) Q2 Earnings Top, Revenues Miss Estimates
Bread Financial Holdings’ (BFH - Free Report) operating income of $1.27 per share for the second quarter of 2023 beat the Zacks Consensus Estimate by 452.2%. The bottom line increased more than fivefold year over year.
Bread Financial Holdings, Inc. Price, Consensus and EPS Surprise
Bread Financial Holdings, Inc. price-consensus-eps-surprise-chart | Bread Financial Holdings, Inc. Quote
Behind the Headlines
Revenues increased 6.6% year over year to $952 million on higher average loan balances and improved loan yields. The top line however missed the consensus estimate by 1.4%.
Credit sales of $7.1 billion decreased 13%, reflecting the sale of the BJ's Wholesale Club portfolio in late February 2023, credit tightening and moderating consumer spending, partially offset by new partner growth. Our estimate was also $7.1 billion.
Average loans of $17.7 billion grew 4%, driven by the addition of new partners as well as further moderation in the consumer payment rate, partially offset by the sale of the BJ's portfolio. Our estimate was $18.2 billion.
Total interest income increased 12% to $1.2 billion and missed our estimate of $1.3 billion. The net interest margin expanded 10 basis points to 18.7%.
Total non-interest expenses more than doubled to $530 million, primarily attributable to an increase in compensation and benefit expense, information processing and communication expense as well as card and processing expenses. Our estimate was $640 million.
The delinquency rate of 5.5% deteriorated 110 basis points year over year, while the net loss rate of 8% deteriorated 240 basis points from the year-ago period.
Pre-tax pre-provision earnings increased 0.5% year over year to $422 million, reflecting profitable growth and continued success with business transformation efforts. Our estimate was $319 million.
Financial Update
As of Jun 30, 2023, cash and cash equivalents were $3.6 billion, down 14.5% from the 2022 level.
At quarter-end, long-term debt and other debt declined 27.3% from 2022-end to $1.4 billion.
Tangible book value of $38.99 per share as of Jun 30, 2023 improved 22.8% year over year.
Cash from operations decreased 0.3% year over year to $741 billion. Capital expenditure at Bread Financial decreased 63.2% year over year to $17 million in the same period.
Capital Deployment
The board of directors approved a new share buyback plan worth $35 million.
The board also approved a quarterly dividend of 21 cents to be paid out on Sep 15 to stockholders of record as of Aug 11.
2023 Guidance
Management estimates average receivables growth in the low to mid-single-digit range from the 2022 level.
Total revenue growth is expected to be slightly above 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. Expenses in the second half of 2023 are expected to be lower than the first half, driven by lower intangible amortization expense and improved operating efficiencies.
The net loss rate is guided in the low-to-mid 7% range.
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
Of the other Business Services sector industry players that have reported second-quarter results so far, the bottom-line results of The Interpublic Group of Companies, Inc. (IPG - Free Report) , Omnicom Group Inc. (OMC - Free Report) and Equifax Inc. (EFX - Free Report) beat the Zacks Consensus Estimate.
Interpublic Group reported second-quarter 2023 adjusted earnings of 74 cents per share, beating the Zacks Consensus Estimate by 23.3% but declining 17.5% on a year-over-year basis. Net revenues of $2.33 billion missed the consensus estimate by 2.9% and decreased 14.9% on a year-over-year basis.
IPG’s operating income in the quarter came in at $310.7 million, down 11% from the prior-year quarter’s levels. Adjusted EBITA came in at $331.9 million, decreasing 10.3% from the prior-year quarter’s level.
Omnicom’s second-quarter 2023 earnings of $1.81 per share beat the consensus estimate by 0.6% and increased 7.7% year over year. Total revenues of $3.6 billion lagged the consensus estimate by 0.3% but increased 1.2% year over year. Across fundamental disciplines, revenues from Advertising & Media were up 5.1%, compared with our estimated growth of 6.3%. Precision marketing revenues jumped 2.3%, compared with our estimate of 14% growth. EBITA of OMC in the quarter came in at $570 million, up 1.4% year over year.
Equifax reported second-quarter 2023 adjusted earnings of $1.71 per share, beating the Zacks Consensus Estimate by 2.4% but declining 18.2% from the year-ago figure. Total revenues of $1.32 billion missed the consensus estimate by 0.4% while matching the year-ago figure on a reported basis. The top line gained 1% on a local-currency basis.
Revenues in the Workforce Solutions segment of EFX totaled $582.8 million, down 4% from the year-ago quarter’s figure. Adjusted EBITDA in the second quarter totaled $431.3 million, down 30% from the year-ago quarter’s level.