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5 Reasons to Retain Synchrony Financial in Your Portfolio

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Estimates for Synchrony Financial (SYF - Free Report) have been revised upward over the past seven days, reflecting brokers’ confidence in the stock. The stock has seen the Zacks Consensus Estimate for 2018 earnings move north by 0.3% over the same time.

Synchrony Financial operates as a consumer financial services company in the United States. Shares of this Zacks Rank #3 (Hold) company have rallied 2.3% in the past year against the industry’s decline of 7.9%.


Let’s take a look quickly at factors that make Synchrony Financials’ stock investors’ favorite.

Positive Earnings Surprise History: The company boasts an encouraging earnings surprise history, with an average trailing four-quarter beat of 11.21%. This definitely reflects its operational excellence.

Increasing Interest Income: The company has been witnessing impressive revenue growth since inception in 2013, mainly driven by its high-interest income. With a four-year CAGR (2013-2017) of 2.6%, the trend even continued in the first half of 2018, with the metric growing further by 7% year over year. Continuous growth in interest income of the company boosted revenues over the past several years. Moreover, it is likely to pave the way for long-term growth.

Inorganic Business Growth: Synchrony Financial actively participates in deals and alliances. In July 2018, it expanded its collaboration with PayPal, which made the company an exclusive issuer of the PayPal credit online consumer financing program in the United States. This move was part of the company’s solid strategy to grow in the digital payments channel.

The company also completed the acquisition of Loop Commerce in May 2018, which fueled its technological capabilities. Recently, it has not only added Furniture Row and The Good Feet Store but also renewed tie-ups with Lowe’s, Robbins Brothers, Ashley HomeStore, LCA Vision, Sleep Number and Havertys. All these alliances aim at bringing diversification to the company’s business lines, which, in turn, boosts its competitive edge.

Solid Retail Card Platform: Retail Card is the most important segment of the company, contributing nearly 74% of Synchrony Financial’s total revenues last year. The segment has been performing strongly over the past many quarters. The momentum continued in the first half of 2018, with Retail Card interest and fees on loans rising 5% year over year. The segment is going to fuel the company’s top line in the months ahead as well.

Growth Projections: The Zacks Consensus Estimate for current-year earnings per share is pegged at $3.40, representing a year-over-year increase of 29.77% on 7.73% higher revenues of $16.2 billion.

For 2019, the Zacks Consensus Estimate for earnings per share stands at $4.15 on $17.34 billion revenues, translating into respective 22.3% and 6.8% year-over-year increase.

Further, the company’s long-term (five years) estimated EPS growth rate of 10.3%, greater than the industry’s earnings growth rate of 9.4%, promises rewards for investors.

Stock to Consider

Investors looking for a few better-ranked stocks in the same sector may consider On Deck Capital, Inc. (ONDK - Free Report) , Euronet Worldwide, Inc. (EEFT - Free Report) and PJT Partners Inc. (PJT - Free Report) .

On Deck Capital operates as an online platform for small business lending in the United States, Canada and Australia. The company managed to deliver positive results in three out of the trailing four quarters, with an average beat of 58.3%. It currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Euronet Worldwide provides payment and transaction processing and distribution solutions to financial institutions, retailers, service providers, and individual consumers worldwide. It presently sports a Zacks Rank #2 (Buy). The company delivered an average trailing four-quarter positive earnings surprise of 0.38%.

PJT Partners provides various advisory, restructuring and special situations, and private fund advisory and placement services to corporations, financial sponsors, institutional investors, and governments worldwide. It reported an average four-quarter positive earnings surprise of 10.57%. The company currently has a Zacks Rank of 2.

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