Yahoo Finance Will Rising Expenses Impact Synchrony's (SYF) Q1 Earnings?
Synchrony Financial SYF is set to report its first-quarter 2024 results on Apr 24, before the opening bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for first-quarter earnings per share of $1.45 suggests a 7.4% increase from the prior-year figure of $1.35. The consensus mark declined by a penny over the past week. The consensus estimate for first-quarter revenues of $4.4 billion indicates a 9.7% increase from the year-ago reported figure.
Synchrony beat the consensus estimate for earnings in three of the trailing four quarters and missed once, with the average surprise being 4.2%. This is depicted in the graph below:
Synchrony Financial Price and EPS Surprise
Synchrony Financial price-eps-surprise | Synchrony Financial Quote
Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at SYF’s previous-quarter performance first.
Q4 Earnings Rewind
The consumer financial services company reported adjusted earnings of $1.03 per share for the previous quarter, beating the Zacks Consensus Estimate by 7.3%. The quarterly results were supported by higher interest earned, thanks to a high-interest rate environment, expanding average loan receivables and elevated benchmark rates. However, increased expenses and provision for credit losses partially offset the upside.
Now, let’s see how things have shaped up before the first-quarter earnings announcement.
Q1 Factors to Note
Synchrony is expected to have seen advantages in the first quarter from increased purchase volume, loan receivables and average active accounts. Additionally, the high-interest rate environment is expected to have supported interest earned by the company.
The Zacks Consensus Estimate for Synchrony’s total purchase volumes for the quarter under review indicates an improvement of 4.4% year over year, while our model predicts a 6.6% increase. Our model also predicts an increase of more than 15% year over year in interest and fees on loans, boosting the top line.
SYF is expected to have consistently gained from digital sales volume in the to-be-reported quarter. Our model estimate suggests that the total average active accounts are expected to have risen nearly 2% year over year in the first quarter.
The financial service provider is expected to have witnessed an increase in Average Interest-Earning Assets. The consensus estimate indicates an 11.5% increase in the metric from the year-ago period, whereas our estimate suggests more than 12% growth. The Zacks Consensus Estimate for the efficiency ratio is pegged at 33.22%, indicating a decline from the prior-year reported figure of 35%.
The above-mentioned factors are likely to have benefited the company in the first quarter, positioning it for year-over-year growth. However, Synchrony is expected to have incurred increased information processing, marketing and business development expenses, employee costs and professional fees in the first quarter.
As such, our estimate for total non-interest expenses for the quarter is pegged at nearly $1.2 billion, suggesting an almost 4% increase. Additionally, we expect a significant jump in provision for credit losses in the quarter under review. Moreover, the ongoing high-interest rate environment may have discouraged certain transactions, potentially constraining SYF's ability to realize its full portfolio growth potential.
The Zacks Consensus Estimate for the net interest margin is pegged at 14.75%, while our estimate suggests a net interest margin of 14.56%, down from 15.22% achieved a year ago, lowering its profit levels and making an earnings beat uncertain. The net charge-offs are also likely to have substantially risen in the quarter under review.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Synchrony this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: The company has an Earnings ESP of -9.21%. This is because the Most Accurate Estimate currently stands at $1.31 per share, lower than the Zacks Consensus Estimate of $1.45.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Synchrony currently carries a Zacks Rank #3.
Stocks to Consider
While an earnings beat looks uncertain for Synchrony, here are some companies from the broader Finance space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
CleanSpark, Inc. CLSK has an Earnings ESP of +63.64% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CleanSpark’s bottom line for the to-be-reported quarter is pegged at 6 cents per share, indicating a 126.1% improvement from the year-ago period. The consensus estimate for CLSK’s revenues is pegged at $103.8 million, suggesting a 143.9% increase from a year ago.
Mr. Cooper Group Inc. COOP has an Earnings ESP of +1.90% and is a Zacks #3 Ranked player.
The Zacks Consensus Estimate for Mr. Cooper Group’s bottom line for the to-be-reported quarter is pegged at $2.11 per share, indicating 80.3% year-over-year growth. The estimate grew by 4 cents in the past week. The consensus estimate for COOP’s revenues is pegged at $493.9 million, suggesting a 49.7% increase from a year ago.
StepStone Group LP STEP has an Earnings ESP of +1.85% and a Zacks Rank of 1.
The Zacks Consensus Estimate for StepStone’s bottom line for the to-be-reported quarter is pegged at 27 cents per share, suggesting a 12.5% year-over-year increase. The estimate increased by a penny over the past week. The consensus estimate for STEP’s revenues is pegged at $186.7 million, predicting an 8.3% increase from the year-ago period.
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Synchrony Financial (SYF) : Free Stock Analysis Report
MR. COOPER GROUP INC (COOP) : Free Stock Analysis Report
Cleanspark, Inc. (CLSK) : Free Stock Analysis Report
StepStone Group Inc. (STEP) : Free Stock Analysis Report
