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Why You Should Hold Synchrony (SYF) Stock in Your Portfolio
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Synchrony Financial (SYF - Free Report) is well-poised to grow on the back of higher interest earned, thanks to a high interest rate environment, expanding average loan receivables, growing digital capabilities and elevated benchmark rates. Its balance sheet strength is a major positive. Over the past three months, the stock has jumped 30.4%, outperforming the industry average of 23.7%.
Synchrony — with a market cap of $15.7 billion — is a premier consumer financial services company that offers a wide range of credit products. Courtesy of solid prospects, this currently Zacks Rank #3 (Hold) stock is worth retaining in your portfolio at the moment.
Let’s delve deeper.
The Zacks Consensus Estimate for SYF’s 2023 earnings is pegged at $5.13 per share, which improved 1.6% in the past 90 days. Synchrony beat on earnings in three of the last four quarters and missed once, the average surprise being 5.5%. This is depicted in the graph below.
The consensus mark for current-year net interest income stands at $17 billion, suggesting an 8.6% rise from the prior-year reported number. Our estimate indicates a significant increase in interest on credit cards, which is likely to support the top-line growth. Innovative products, a strong labor market and normalizing payment rates should further fuel growth in net interest income.
The company’s Health & Wellness platform is expected to continue its growth track, thanks to a solid CareCredit brand. SYF’s focus on growing the brand with partnerships and collaborations is noteworthy. The company recently partnered with J. Crew Group and Mastercard to issue co-branded cards. Dual and co-branded cards comprised 42% of the total purchase volume in the third quarter. Synchrony is enhancing its core value proposition by expanding its product utility, enabling customers to use digital wallets, make out of partner purchases and get rewarded.
The Health & Wellness platform witnessed 10.2% year-over-year growth in average active accounts in 2022. Our estimate for 2023 indicates a further increase of more than 10%. We expect loan receivables to witness a nearly 20.7% jump this year.
The company expects total loan receivables to grow approximately 11% in 2023, following a 14.5% increase witnessed in 2022. It also anticipates interest and fees to grow and the net interest margin of approximately 15.15% this year.
SYF exited the second quarter with cash and equivalents of $15.6 billion, which increased from $10.3 billion at 2022-end. It has a total debt to capital of 52.5%, lower than the industry average of 55.2%. Its balance sheet health supports the shareholder value-boosting measures. Synchrony also announced the sale of its Pets Best subsidiary in November 2023, which is expected to free up capital for the company.
In the September quarter alone, it returned capital worth $254 million through share repurchases of $150 million and paid common stock dividends of $104 million. It had a remaining share buyback capacity of $850 million at the end of September 2023. Its dividend yield of 2.6% compares favorably with the industry average of 2.1%.
Key Risks
However, there are a few factors that investors should keep an eye on.
Although the continuous high interest rate environment is helping Synchrony earn higher interest income, it will likely affect consumers’ spending levels. Also, losses are expected to build up on cards, as well as office real estate. Moreover, it expects net charge-offs for 2023 to be 4.85%, which suggests a significant increase from the 2022 reported figure of 3%. Nevertheless, we believe that a systematic and strategic plan of action will drive SYF’s growth in the long term.
The consensus mark for Blue Owl Capital’s current-year earnings is pegged at $1.91 per share, indicating 35.5% year-over-year growth. Furthermore, the consensus estimate for OBDC’s revenues in 2023 suggests 30.4% year-over-year growth.
The Zacks Consensus Estimate for Axos Financial’s current fiscal-year earnings has improved 3.3% over the past month. It beat earnings estimates in each of the past four quarters, with an average surprise of 11.6%. Also, the consensus mark for AX’s revenues in the current year suggests 12.2% year-over-year growth.
The Zacks Consensus Estimate for Globe Life’s current-year earnings is pegged at $10.60 per share, which indicates 30.1% year-over-year growth. It has witnessed one upward estimate revision against none in the opposite direction in the past 60 days. It beat earnings estimates in all the past four quarters, with an average surprise of 2.3%.
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Why You Should Hold Synchrony (SYF) Stock in Your Portfolio
Synchrony Financial (SYF - Free Report) is well-poised to grow on the back of higher interest earned, thanks to a high interest rate environment, expanding average loan receivables, growing digital capabilities and elevated benchmark rates. Its balance sheet strength is a major positive. Over the past three months, the stock has jumped 30.4%, outperforming the industry average of 23.7%.
Synchrony — with a market cap of $15.7 billion — is a premier consumer financial services company that offers a wide range of credit products. Courtesy of solid prospects, this currently Zacks Rank #3 (Hold) stock is worth retaining in your portfolio at the moment.
Let’s delve deeper.
The Zacks Consensus Estimate for SYF’s 2023 earnings is pegged at $5.13 per share, which improved 1.6% in the past 90 days. Synchrony beat on earnings in three of the last four quarters and missed once, the average surprise being 5.5%. This is depicted in the graph below.
Synchrony Financial Price and EPS Surprise
Synchrony Financial price-eps-surprise | Synchrony Financial Quote
The consensus mark for current-year net interest income stands at $17 billion, suggesting an 8.6% rise from the prior-year reported number. Our estimate indicates a significant increase in interest on credit cards, which is likely to support the top-line growth. Innovative products, a strong labor market and normalizing payment rates should further fuel growth in net interest income.
The company’s Health & Wellness platform is expected to continue its growth track, thanks to a solid CareCredit brand. SYF’s focus on growing the brand with partnerships and collaborations is noteworthy. The company recently partnered with J. Crew Group and Mastercard to issue co-branded cards. Dual and co-branded cards comprised 42% of the total purchase volume in the third quarter. Synchrony is enhancing its core value proposition by expanding its product utility, enabling customers to use digital wallets, make out of partner purchases and get rewarded.
The Health & Wellness platform witnessed 10.2% year-over-year growth in average active accounts in 2022. Our estimate for 2023 indicates a further increase of more than 10%. We expect loan receivables to witness a nearly 20.7% jump this year.
The company expects total loan receivables to grow approximately 11% in 2023, following a 14.5% increase witnessed in 2022. It also anticipates interest and fees to grow and the net interest margin of approximately 15.15% this year.
SYF exited the second quarter with cash and equivalents of $15.6 billion, which increased from $10.3 billion at 2022-end. It has a total debt to capital of 52.5%, lower than the industry average of 55.2%. Its balance sheet health supports the shareholder value-boosting measures. Synchrony also announced the sale of its Pets Best subsidiary in November 2023, which is expected to free up capital for the company.
In the September quarter alone, it returned capital worth $254 million through share repurchases of $150 million and paid common stock dividends of $104 million. It had a remaining share buyback capacity of $850 million at the end of September 2023. Its dividend yield of 2.6% compares favorably with the industry average of 2.1%.
Key Risks
However, there are a few factors that investors should keep an eye on.
Although the continuous high interest rate environment is helping Synchrony earn higher interest income, it will likely affect consumers’ spending levels. Also, losses are expected to build up on cards, as well as office real estate. Moreover, it expects net charge-offs for 2023 to be 4.85%, which suggests a significant increase from the 2022 reported figure of 3%. Nevertheless, we believe that a systematic and strategic plan of action will drive SYF’s growth in the long term.
Key picks
Investors interested in the broader Finance space can consider some better-ranked companies like Blue Owl Capital Corporation (OBDC - Free Report) , Axos Financial, Inc. (AX - Free Report) and Globe Life Inc. (GL - Free Report) . Each of these companies presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The consensus mark for Blue Owl Capital’s current-year earnings is pegged at $1.91 per share, indicating 35.5% year-over-year growth. Furthermore, the consensus estimate for OBDC’s revenues in 2023 suggests 30.4% year-over-year growth.
The Zacks Consensus Estimate for Axos Financial’s current fiscal-year earnings has improved 3.3% over the past month. It beat earnings estimates in each of the past four quarters, with an average surprise of 11.6%. Also, the consensus mark for AX’s revenues in the current year suggests 12.2% year-over-year growth.
The Zacks Consensus Estimate for Globe Life’s current-year earnings is pegged at $10.60 per share, which indicates 30.1% year-over-year growth. It has witnessed one upward estimate revision against none in the opposite direction in the past 60 days. It beat earnings estimates in all the past four quarters, with an average surprise of 2.3%.