A month has gone by since the last earnings report for Synchrony (SYF Quick QuoteSYF - Free Report) . Shares have added about 4.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Synchrony due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Synchrony Financial Q1 Earnings Top Estimates, Up Y/Y

Synchrony Financial’s first-quarter 2019 earnings per share of $1 beat the Zacks Consensus Estimate by 13.6%. The bottom line also improved 20.5% year over year on the back of higher net interest income and the PayPal Credit Program purchase. This excludes the impact of Walmart portfolio.

Results in Detail

The company’s net interest income increased 10% to $4.2 billion in the first quarter, primarily owing to the PayPal Credit program acquisition and loan receivables growth.

However, other income rose 22.7% to $92 million.

In the quarter under review, loan receivables inched up 3% year over year to $80.4 billion.

Deposits were $64.1 billion, up 13% from the year-ago quarter.

Purchase volume expanded 10% from the first quarter of 2018 to $32.5 billion.

Provision for loan loss decreased 37% year over year to $859 million due to the reserve release related to the reclassification of the Walmart portfolio to loans held for sale.

Total other expenses climbed 6% to $1 billion, primarily due to the PayPal Credit program buyout and the growth-related costs.

Sales Platforms Update

Retail Card

The company’s interest and fees on loans grew 14.6% year over year.
Loan receivables inched up 1% while the average active accounts increased10%, all driven by the company’s consolidation of the PayPal Credit program.

Payment Solutions

Interest and fees on loans rose 7% year over year on the back of loan receivables growth. Loan receivables augmented 8%, led by home furnishings and luxury products.

Purchase volume expanded 4% while average active account rose 3%.

CareCredit

Interest and fees on loans increased 6% year over year, attributable to loan receivables growth. The metric was enhanced by dental and veterinary.
While purchase volume registered 8% growth, the average active account reported a 4% rise.

Financial Position

Total assets as of Mar 31, 2019 were $105.4 billion, down 1.3% from the level as of Dec 31, 2019. Total borrowings at the end of first-quarter 2019 were $21.8 billion, down 8.8%from the level at 2018 end.

The company’s balance sheet was consistently strong during the reported quarter with a total liquidity of $23.4 billion reflecting 22.2% of the total assets. While return on assets was 4.3%, the return on equity was 30.4%.
Efficiency ratio was 31% compared with 30.9% in first-quarter 2018.

Capital Deployment

During the quarter under review, the company paid a common stock dividend of 21 cents per share and also repurchased shares worth $966 million.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Synchrony has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Synchrony has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.