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Synchrony Financial’s (SYF - Free Report) first-quarter 2020 earnings per share of 58 cents per share missed the Zacks Consensus Estimate by 25.6%. The bottom line also declined 42% year over year due to muted revenues. Results in Detail
The company’s net interest income decreased 8% to $3.9 billion in the first quarter due to the impact of the Walmart consumer portfolio sale.
Moreover, its other income increased 5.4% to $97 million, mainly attributable to lower loyalty program expenses.
In the quarter under review, loan receivables inched up 3% year over year. Deposits were $64.6 billion, up 1% from the year-ago quarter.
Provision for credit loss increased 95% year over year to $1.7 billion due to Walmart credit loss reserve reduction, a higher reserve build related to coronavirus and CECL in the first quarter.
Total other expense dipped 3.9% year over year to $1 billion due to lower employee costs, professional fees, marketing and business development expenses.
The company’s interest and fees on loans fell 12% year over year due to the sale of the Walmart consumer portfolio.
Loan receivables were up 2% while the average active accounts declined 10%.
Payment Solutions
Interest and fees on loans rose 3% year over year on the back of loan receivables growth. Loan receivables augmented 3% year over year.
Purchase volume expanded 2% while average active account rose 2%.
CareCredit
Interest and fees on loans increased 9% year over year, attributable to higher loans receivables.
Loan receivables grew 7% year over year on the back of dental and veterinary.
While purchase volume registered 2% growth, the average active account reported a 5% rise.
Financial Position
Total assets as of Mar 31, 2020 were $98 billion, down 7% year over year.
Total borrowings as of Mar 31, 2020 were $17.2 billion, down 21.2% from the year-ago quarter.
The company’s balance sheet was consistently strong during the reported quarter with total liquidity of $24.8 billion reflecting 25.3% of the total assets.
While return on assets was 1.1%, the return on equity was 9.1%.
Efficiency ratio was 32.7% in the first quarter of 2020.
Capital Deployment
During the quarter under consideration, the company repurchased shares worth $1 billion. However, it suspended the rest of the buyback capacity due to the COVID-19 impact.
Moreover, it paid quarterly dividend of 22 cents per share.
Rank
Synchrony Financial carries a Zacks Rank #4 (Sell).
Some stocks worth considering from the finance sector with a perfect mix of elements to surpass estimates in the upcoming quarterly releases are as follows:
CURO Group Holdings Corp. has an Earnings ESP of +1.47% and a Zacks Rank #1. The company is scheduled to release first-quarter earnings on May 4.
Credit Acceptance Corporation (CACC - Free Report) is set to report first-quarter earnings on May 4. The stock has a Zacks Rank #3 and an Earnings ESP of +11.28%.
Virtu Financial, Inc. (VIRT - Free Report) is slated to announce first-quarter earnings on May 7. The stock has an Earnings ESP of +41.57% and a Zacks Rank of 1.
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Synchrony Financial's (SYF) Q1 Earnings Miss, Decline Y/Y
Synchrony Financial’s (SYF - Free Report) first-quarter 2020 earnings per share of 58 cents per share missed the Zacks Consensus Estimate by 25.6%. The bottom line also declined 42% year over year due to muted revenues.
Results in Detail
The company’s net interest income decreased 8% to $3.9 billion in the first quarter due to the impact of the Walmart consumer portfolio sale.
Moreover, its other income increased 5.4% to $97 million, mainly attributable to lower loyalty program expenses.
In the quarter under review, loan receivables inched up 3% year over year.
Deposits were $64.6 billion, up 1% from the year-ago quarter.
Provision for credit loss increased 95% year over year to $1.7 billion due to Walmart credit loss reserve reduction, a higher reserve build related to coronavirus and CECL in the first quarter.
Total other expense dipped 3.9% year over year to $1 billion due to lower employee costs, professional fees, marketing and business development expenses.
Synchrony Financial Price and EPS Surprise
Synchrony Financial price-eps-surprise | Synchrony Financial Quote
Sales Platforms Update
Retail Card
The company’s interest and fees on loans fell 12% year over year due to the sale of the Walmart consumer portfolio.
Loan receivables were up 2% while the average active accounts declined 10%.
Payment Solutions
Interest and fees on loans rose 3% year over year on the back of loan receivables growth. Loan receivables augmented 3% year over year.
Purchase volume expanded 2% while average active account rose 2%.
CareCredit
Interest and fees on loans increased 9% year over year, attributable to higher loans receivables.
Loan receivables grew 7% year over year on the back of dental and veterinary.
While purchase volume registered 2% growth, the average active account reported a 5% rise.
Financial Position
Total assets as of Mar 31, 2020 were $98 billion, down 7% year over year.
Total borrowings as of Mar 31, 2020 were $17.2 billion, down 21.2% from the year-ago quarter.
The company’s balance sheet was consistently strong during the reported quarter with total liquidity of $24.8 billion reflecting 25.3% of the total assets.
While return on assets was 1.1%, the return on equity was 9.1%.
Efficiency ratio was 32.7% in the first quarter of 2020.
Capital Deployment
During the quarter under consideration, the company repurchased shares worth $1 billion. However, it suspended the rest of the buyback capacity due to the COVID-19 impact.
Moreover, it paid quarterly dividend of 22 cents per share.
Rank
Synchrony Financial carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Upcoming Releases From Finance Sector
Some stocks worth considering from the finance sector with a perfect mix of elements to surpass estimates in the upcoming quarterly releases are as follows:
CURO Group Holdings Corp. has an Earnings ESP of +1.47% and a Zacks Rank #1. The company is scheduled to release first-quarter earnings on May 4.
Credit Acceptance Corporation (CACC - Free Report) is set to report first-quarter earnings on May 4. The stock has a Zacks Rank #3 and an Earnings ESP of +11.28%.
Virtu Financial, Inc. (VIRT - Free Report) is slated to announce first-quarter earnings on May 7. The stock has an Earnings ESP of +41.57% and a Zacks Rank of 1.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>