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Bread Financial (BFH) Q3 Earnings Top, Credit Sales Drop
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Bread Financial Holdings’ (BFH - Free Report) operating income of $3.46 per share for the third quarter of 2023 beat the Zacks Consensus Estimate by 54.5%. The bottom line increased 28.6% year over year.
Behind the Headlines
Revenues increased 5.3% year over year to $1 billion, driven by higher finance charge yields and non-interest income. The top line beat the consensus estimate by 4%.
Credit sales of $6.7 billion decreased 13%, reflecting the sale of the BJ's Wholesale Club portfolio in late February 2023, ongoing strategic credit tightening and moderating consumer spending, partially offset by new partner growth. Our estimate was $7.2 billion.
Bread Financial Holdings, Inc. Price, Consensus and EPS Surprise
Average loans of $17.5 billion were flat year over year, driven by the addition of new partners as well as further moderation in the consumer payment rate, offset by the decline in credit sales noted above and the sale of the BJ's portfolio. Our estimate was $18.3 billion.
Total interest income increased 7% to $1.3 billion. Our estimate was $1.3 billion. The net interest margin expanded 70 basis points to 20.6%. The Zacks Consensus Estimate was 19.9%.
Total non-interest expenses increased 3% to $502 million, primarily attributable to an increase in card and processing expenses and employee compensation and benefit costs. Our estimate was $499.2 million.
The delinquency rate of 6.3% deteriorated 60 basis points year over year. Net loss rate of 6.9% deteriorated 190 basis points.
Pre-tax pre-provision earnings increased 7% year over year to $529 million, reflecting profitable growth and continued success with business transformation efforts. Our estimate was $485.5 million.
Financial Update
As of Sep 30, 2023, cash and cash equivalents were $3.4 billion, down 13.1% 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 $42.45 per share as of Sep 30, 2023 improved 24% year over year.
Return on average equity was 24.8%, up 200 basis points year over year.
Cash from operations in the first nine months increased 1.4% year over year to $1.4 billion. Capital expenditure at Bread Financial decreased 53.4% year over year to $27 million in the same period.
Capital Deployment
The board of directors exhausted its share buyback plan worth $35 million.
The board also approved a quarterly dividend of 21 cents to be paid out on Dec 15 to stockholders of record as of Nov 13.
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 rise 8-9%.
Visa Inc. (V - Free Report) reported solid fourth-quarter fiscal 2023 results, driven by increased payments, cross-border volumes and processed transactions. Steady cross-border travel growth, resilient consumer spending and higher-than-expected data processing aided the results, partially offset by increased costs and client incentives.
The company reported fourth-quarter fiscal 2023 EPS of $2.33, which beat the Zacks Consensus Estimate of $2.23 by 4.5%. The bottom line improved 21% year over year.
Mastercard Incorporated (MA - Free Report) reported third-quarter 2023 adjusted earnings of $3.39 per share, which beat the Zacks Consensus Estimate by 5.6%. The bottom line improved 26% year over year.
The leading technology company in the global payments industry reported net revenues of $6,533 million, which rose 14% year over year in the quarter under review. The top line outpaced the consensus mark by a whisker.
Cross-border volumes (a key measure that tracks spending on cards beyond the issuing country) improved 21% on a local currency basis. Value-added services and solutions net revenues rose 17% year over year to $2,323 million. MA’s clients issued 3.3 billion Mastercard and Maestro-branded cards as of Sep 30, 2023.
The Western Union Company (WU - Free Report) reported third-quarter 2023 adjusted earnings per share (EPS) of 43 cents, beating the Zacks Consensus Estimate by 13.2%. The bottom line rose 2.4% year over year. Total revenues rose 1% year over year on a reported basis or 7% on a constant-currency basis to $1,097.8 million. Moreover, the top line beat the Zacks Consensus Estimate by 6.3%.
Adjusted operating margin of 19.6% deteriorated 100 basis points year over year due to higher technology and variable costs.
The company revised its guidance upward and expects adjusted revenues to decline 1% or rise 1% in 2023 from the 2022 level of $1,107.3 million. Adjusted EPS is anticipated to be in the range of $1.65-$1.75 for 2023. The midpoint of the guidance indicates a decline from the 2022 reported figure of $1.76 per share. Adjusted operating margin is expected to be between 19% and 21%.
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Bread Financial (BFH) Q3 Earnings Top, Credit Sales Drop
Bread Financial Holdings’ (BFH - Free Report) operating income of $3.46 per share for the third quarter of 2023 beat the Zacks Consensus Estimate by 54.5%. The bottom line increased 28.6% year over year.
Behind the Headlines
Revenues increased 5.3% year over year to $1 billion, driven by higher finance charge yields and non-interest income. The top line beat the consensus estimate by 4%.
Credit sales of $6.7 billion decreased 13%, reflecting the sale of the BJ's Wholesale Club portfolio in late February 2023, ongoing strategic credit tightening and moderating consumer spending, partially offset by new partner growth. Our estimate was $7.2 billion.
Bread Financial Holdings, Inc. Price, Consensus and EPS Surprise
Bread Financial Holdings, Inc. price-consensus-eps-surprise-chart | Bread Financial Holdings, Inc. Quote
Average loans of $17.5 billion were flat year over year, driven by the addition of new partners as well as further moderation in the consumer payment rate, offset by the decline in credit sales noted above and the sale of the BJ's portfolio. Our estimate was $18.3 billion.
Total interest income increased 7% to $1.3 billion. Our estimate was $1.3 billion. The net interest margin expanded 70 basis points to 20.6%. The Zacks Consensus Estimate was 19.9%.
Total non-interest expenses increased 3% to $502 million, primarily attributable to an increase in card and processing expenses and employee compensation and benefit costs. Our estimate was $499.2 million.
The delinquency rate of 6.3% deteriorated 60 basis points year over year. Net loss rate of 6.9% deteriorated 190 basis points.
Pre-tax pre-provision earnings increased 7% year over year to $529 million, reflecting profitable growth and continued success with business transformation efforts. Our estimate was $485.5 million.
Financial Update
As of Sep 30, 2023, cash and cash equivalents were $3.4 billion, down 13.1% 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 $42.45 per share as of Sep 30, 2023 improved 24% year over year.
Return on average equity was 24.8%, up 200 basis points year over year.
Cash from operations in the first nine months increased 1.4% year over year to $1.4 billion. Capital expenditure at Bread Financial decreased 53.4% year over year to $27 million in the same period.
Capital Deployment
The board of directors exhausted its share buyback plan worth $35 million.
The board also approved a quarterly dividend of 21 cents to be paid out on Dec 15 to stockholders of record as of Nov 13.
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 rise 8-9%.
The net loss rate is guided in the 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
Visa Inc. (V - Free Report) reported solid fourth-quarter fiscal 2023 results, driven by increased payments, cross-border volumes and processed transactions. Steady cross-border travel growth, resilient consumer spending and higher-than-expected data processing aided the results, partially offset by increased costs and client incentives.
The company reported fourth-quarter fiscal 2023 EPS of $2.33, which beat the Zacks Consensus Estimate of $2.23 by 4.5%. The bottom line improved 21% year over year.
Mastercard Incorporated (MA - Free Report) reported third-quarter 2023 adjusted earnings of $3.39 per share, which beat the Zacks Consensus Estimate by 5.6%. The bottom line improved 26% year over year.
The leading technology company in the global payments industry reported net revenues of $6,533 million, which rose 14% year over year in the quarter under review. The top line outpaced the consensus mark by a whisker.
Cross-border volumes (a key measure that tracks spending on cards beyond the issuing country) improved 21% on a local currency basis. Value-added services and solutions net revenues rose 17% year over year to $2,323 million. MA’s clients issued 3.3 billion Mastercard and Maestro-branded cards as of Sep 30, 2023.
The Western Union Company (WU - Free Report) reported third-quarter 2023 adjusted earnings per share (EPS) of 43 cents, beating the Zacks Consensus Estimate by 13.2%. The bottom line rose 2.4% year over year. Total revenues rose 1% year over year on a reported basis or 7% on a constant-currency basis to $1,097.8 million. Moreover, the top line beat the Zacks Consensus Estimate by 6.3%.
Adjusted operating margin of 19.6% deteriorated 100 basis points year over year due to higher technology and variable costs.
The company revised its guidance upward and expects adjusted revenues to decline 1% or rise 1% in 2023 from the 2022 level of $1,107.3 million. Adjusted EPS is anticipated to be in the range of $1.65-$1.75 for 2023. The midpoint of the guidance indicates a decline from the 2022 reported figure of $1.76 per share. Adjusted operating margin is expected to be between 19% and 21%.