Banking, finance, and taxes

Should Investors Expect More From Synchrony Financial?

Chris Lange

Published: April 20, 2018 8:50 am

Last Updated: January 12, 2020 12:44 am

Synchrony Financial (NYSE: SYF) released its first-quarter financial results before the markets opened on Friday. Although the numbers completely beat estimates, there has only been a small response from investors.

The company said that it had $0.83 in earnings per share (EPS) on $4.24 billion in revenue. Consensus estimates from Thomson Reuters had called for $0.76 in EPS on revenue of $3.9 billion. In the same period of last year, Synchrony said it had EPS of $0.61 and $3.59 billion in revenue.

During this quarter, Synchrony’s loan receivables grew $5 billion, or 6%, to $78 billion, and deposits grew $5 billion, or 10%, to $57 billion.

In terms of its sales platforms, the firm reported:

• Retail Card period-end loan receivables grew 5% reflecting broad-based growth across partner programs. Interest and fees on loans increased 7%, primarily driven by the loan receivables growth. Purchase volume and average active account growth was 2%.
• Payment Solutions period-end loan receivables grew 8%, led by home furnishing and automotive. Interest and fees on loans increased 9%, primarily driven by the loan receivables growth. Purchase volume growth was 7%, adjusted to exclude the impact from the hhgregg bankruptcy, and average active account growth was 5%.
• CareCredit period-end loan receivables grew 8%, led by dental and veterinary. Interest and fees on loans increased 8%, primarily driven by the loan receivables growth. Purchase volume grew 8% and average active account growth was 7%.

Book value per share was $18.88 for the first quarter, and tangible common equity per share was $16.55.

On the books, Synchrony’s cash and cash equivalents totaled $13.04 billion at the end of the quarter, up from $11.60 billion at the end of the previous fiscal year.

Margaret Keane, president and CEO of Synchrony, commented:

We started the year with solid results as we continued to drive organic growth, while also winning exciting new partnerships. Furthermore, we closed several key renewals during the quarter and made investments to help augment our capabilities. Innovative value propositions, compelling promotional offers, and robust data, analytics and digital capabilities, remain a hallmark of our business, and continue to drive value for our partners and cardholders. Returning capital to shareholders remains a key priority, and we are pleased to continue to return significant capital to shareholders through our dividend and share repurchase program, while also deploying capital through organic growth and program acquisitions.

Shares of Synchrony closed Thursday at $35.35, with a consensus analyst price target of $43.93 and a 52-week range of $26.01 to $40.59. Following the announcement, the stock was up 1.5% at $35.88 in early trading indications Friday.