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Synchrony (SYF) Up 5.1% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Synchrony (SYF). Shares have added about 5.1% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important drivers.

Synchrony Financial’s Q3 Earnings Beat on Purchase Volume

Synchrony Financial reported third-quarter 2022 adjusted earnings per share of $1.47, which surpassed the Zacks Consensus Estimate of $1.42. The bottom line, however, fell 26.5% from the year-ago level.

SYF’s net interest income increased 7.4% year over year to $3,928 million for the quarter under review, beating the Zacks Consensus Estimate of $3,841 million and Our estimate of $3,793.3 million.

SYF reported better-than-expected third-quarter results on the back of solid growth in purchase volume. It also gained significant contributions from all sales platforms. The results benefitted from increased interest and fees on loans. However, the results were partially offset by steep expenses and decreased average active accounts.

Q3 Results in Detail

Other income of $44 million plunged 53.2% year over year and missed the Zacks Consensus Estimate of $82 million, owing to increased loyalty costs.

For the third quarter, total loan receivables increased 13% year over year to $86 billion and beat our estimate of $82 billion. Total deposits amounted to $68.4 billion, up 13% year over year. Provision for credit losses significantly jumped to $929 million on the back of a reserve increase.

Its total purchase volume for the third quarter jumped 6.3% year over year to $44,557 million. Interest and fees on loans increased 9.5% year over year to $4,258 million, thanks to growth in average loan receivables. Net interest margin was 15.5%, marking a 7-basis point rise.

New accounts fell 6% year over year to 5.8 million. Average active accounts decreased 1% year over year to 66.3 million.

Total other expenses of $1,064 million increased 10.7% year over year for the quarter under consideration due to rising employee costs, information processing, marketing spending and other expenses. The efficiency ratio reached 36.5% in the quarter, marking a 220-basis point decrease.

Individual Sales Platforms Update

Home & Auto period-end loan receivables grew 10.7% year over year for the third quarter to $29,017 million, due to increased purchase volume and moderated payment rate. Purchase volume improved 10.9% year over year to $12,273 million, owing to higher home, furniture and auto-related spending. Interest and fees on loans were up 10.8% year over year to $1,210 million.

Digital loan receivables rose 16.7% year over year to $22,925 million due to strong purchase volumes. Purchase volume climbed 17.9% year over year to $12,941 million on the back of robust engagement across various programs. Interest and fees on loans increased 23% year over year to $1,197 million.

Diversified & Value period-end loan receivables increased 14.9% year over year to $16,566 million on the back of continued strength in purchase volume. Purchase volume improved 20.4% year over year for the quarter under review to $14,454 million due to increased partner penetration and retailer performance. Interest and fees on loans increased 19.9% year over year to $935 million.

Health & Wellness period-end loan receivables grew 17.3% year over year to $11,590 million and purchase volume advanced 16.2% to $3,514 million, highlighting broad-based growth across active accounts and increased spending in its dental and pet categories. Interest and fees on loans increased 20.3% year over year to $706 million.

Lifestyle period-end loan receivables improved 8.6% year over year for the third quarter to $5,686 million on purchase volume strength and financing products. Purchase volume inched up 5.9% year over year to $1,374 million due to a rebound in the luxury industry. Interest and fees on loans advanced 11.2% year over year to $208 million.

Financial Position (as of Sep 30, 2022)

SYF exited third-quarter 2022 with total assets of $100.8 billion, growing 9.6% year over year. Total borrowings of $14.3 billion rose 12.2% year over year at the third quarter-end.

As of Sep 30, 2022, the company had cash and cash equivalents of $12 billion, which jumped 22% year over year.

SYF’s balance sheet was consistently strong during the reported quarter, with total liquidity of $20.3 billion accounting for 20.1% of its total assets.

Return on assets and equity were 2.8% and 21.1%, respectively, for the third quarter.

Capital Deployment

During the third quarter, Synchrony Financial returned capital worth $1.1 billion in the form of share buybacks of $950 million and common stock dividends of $109 million. The company currently has remaining share buyback authorization of $1.4 billion.

2022 View

Synchrony Financial expects around 12% loan receivables growth for 2022 due to underlying trends of payment rates and high purchase volume strength. It expects a net interest margin of around 15.55%. Net charge-offs are expected to remain around 3.05%. It witnessed strong credit performance in the first nine months of 2022. SYF expects operating expenses of $1,050 million per quarter for the year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

The consensus estimate has shifted 6.44% due to these changes.

VGM Scores

Currently, Synchrony has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Synchrony has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Synchrony is part of the Zacks Financial - Miscellaneous Services industry. Over the past month, Euronet Worldwide (EEFT), a stock from the same industry, has gained 9.9%. The company reported its results for the quarter ended September 2022 more than a month ago.

Euronet Worldwide reported revenues of $931.3 million in the last reported quarter, representing a year-over-year change of +14.1%. EPS of $2.74 for the same period compares with $1.77 a year ago.

Euronet Worldwide is expected to post earnings of $1.26 per share for the current quarter, representing a year-over-year change of +9.6%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Euronet Worldwide. Also, the stock has a VGM Score of A.

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