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Will Rising Expenses Affect Synchrony's (SYF) Q3 Earnings?
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Synchrony Financial (SYF - Free Report) is set to report its third-quarter 2023 results on Oct 24, before the opening bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for third-quarter earnings per share of $1.46 suggests a 0.7% decrease from the prior-year figure of $1.47. The consensus mark remained stable over the past week. The consensus estimate for third-quarter revenues of $4.3 billion indicates a 9.5% 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 5.7%. This is depicted in the graph below:
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.
Q2 Earnings Rewind
The consumer financial services company reported adjusted earnings of $1.32 per share for the previous quarter, beating the Zacks Consensus Estimate by 8.2%. The quarterly results were supported by increased interest earned, thanks to a high interest rate environment, expanding average loan receivables and elevated benchmark rates. However, higher expenses and provision for credit losses partially offset the upside.
Synchrony is expected to have benefited from higher purchase volume, loan receivables and active accounts in the third quarter. The high interest rate environment is anticipated to have aided its interest earned.
The Zacks Consensus Estimate for Synchrony’s total purchase volumes for the quarter under review indicates an improvement of 7.6% year over year. Our model predicts an increase of more than 17% 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 and the Zacks Consensus Estimate suggest the total average active accounts to have risen 5.4% year over year in the third quarter.
The financial service provider is expected to have witnessed an increase in Average Interest-Earnings Assets. The consensus estimate indicates an 11.8% increase in the metric from the year-ago period, whereas our estimate suggests nearly 9% growth. The Zacks Consensus Estimate for the efficiency ratio is pegged at 34.48%, suggesting a decline from the prior-year reported figure of 36.50%.
While the above-mentioned factors are likely to have benefited the company in the third quarter, some elements are anticipated to have offset the positives, leading to a year-over-year decline in earnings and making an earnings beat uncertain. Synchrony is expected to have incurred increased employee costs, information processing, professional fees and marketing and business development expenses in the third quarter.
Our estimate for total non-interest expenses for the quarter indicates 8.6% year-over-year growth. Higher expenses are likely to have reduced the margins in the quarter under review. Furthermore, the prevailing high interest rate environment is expected to have deterred certain transactions, limiting SYF's ability to achieve its full portfolio growth potential.
The Zacks Consensus Estimate for the net interest margin is pegged at 15.08%, down from 15.52% a year ago, while our estimate suggests a net interest margin of 15.24%. 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 -0.70%. This is because the Most Accurate Estimate currently stands at $1.45 per share, lower than the Zacks Consensus Estimate of $1.46.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
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:
Welltower Inc. (WELL - Free Report) has an Earnings ESP of +0.28% and is a Zacks #2 Ranked player.
The Zacks Consensus Estimate for Welltower’s bottom line for the to-be-reported quarter is pegged at 89 cents per share, indicating 6% year-over-year growth. It has remained stable over the past week. The consensus estimate for WELL’s revenues is pegged at $1.6 billion, suggesting a 10.8% increase from a year ago.
OneMain Holdings, Inc. (OMF - Free Report) has an Earnings ESP of +1.93% and a Zacks Rank of 3.
The Zacks Consensus Estimate for OneMain’s bottom line for the to-be-reported quarter is pegged at $1.50 per share. The consensus estimate for revenues is pegged at $908.4 million, indicating a 1.5% increase from a year ago. OMF beat earnings estimates in two of the past four quarters and missed twice.
KKR & Co. Inc. (KKR - Free Report) has an Earnings ESP of +1.25% and a Zacks Rank of 3.
The Zacks Consensus Estimate for KKR’s bottom line for the to-be-reported quarter is pegged at 80 cents per share, which increased by 2 cents in the past week. KKR beat earnings estimates in all the past four quarters, with an average surprise of 7.5%.
Image: Bigstock
Will Rising Expenses Affect Synchrony's (SYF) Q3 Earnings?
Synchrony Financial (SYF - Free Report) is set to report its third-quarter 2023 results on Oct 24, before the opening bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for third-quarter earnings per share of $1.46 suggests a 0.7% decrease from the prior-year figure of $1.47. The consensus mark remained stable over the past week. The consensus estimate for third-quarter revenues of $4.3 billion indicates a 9.5% 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 5.7%. 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.
Q2 Earnings Rewind
The consumer financial services company reported adjusted earnings of $1.32 per share for the previous quarter, beating the Zacks Consensus Estimate by 8.2%. The quarterly results were supported by increased interest earned, thanks to a high interest rate environment, expanding average loan receivables and elevated benchmark rates. However, higher expenses and provision for credit losses partially offset the upside.
Now let’s see how things have shaped up before the third-quarter earnings announcement.
Q3 Factors to Note
Synchrony is expected to have benefited from higher purchase volume, loan receivables and active accounts in the third quarter. The high interest rate environment is anticipated to have aided its interest earned.
The Zacks Consensus Estimate for Synchrony’s total purchase volumes for the quarter under review indicates an improvement of 7.6% year over year. Our model predicts an increase of more than 17% 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 and the Zacks Consensus Estimate suggest the total average active accounts to have risen 5.4% year over year in the third quarter.
The financial service provider is expected to have witnessed an increase in Average Interest-Earnings Assets. The consensus estimate indicates an 11.8% increase in the metric from the year-ago period, whereas our estimate suggests nearly 9% growth. The Zacks Consensus Estimate for the efficiency ratio is pegged at 34.48%, suggesting a decline from the prior-year reported figure of 36.50%.
While the above-mentioned factors are likely to have benefited the company in the third quarter, some elements are anticipated to have offset the positives, leading to a year-over-year decline in earnings and making an earnings beat uncertain. Synchrony is expected to have incurred increased employee costs, information processing, professional fees and marketing and business development expenses in the third quarter.
Our estimate for total non-interest expenses for the quarter indicates 8.6% year-over-year growth. Higher expenses are likely to have reduced the margins in the quarter under review. Furthermore, the prevailing high interest rate environment is expected to have deterred certain transactions, limiting SYF's ability to achieve its full portfolio growth potential.
The Zacks Consensus Estimate for the net interest margin is pegged at 15.08%, down from 15.52% a year ago, while our estimate suggests a net interest margin of 15.24%. 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 -0.70%. This is because the Most Accurate Estimate currently stands at $1.45 per share, lower than the Zacks Consensus Estimate of $1.46.
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 #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
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:
Welltower Inc. (WELL - Free Report) has an Earnings ESP of +0.28% and is a Zacks #2 Ranked player.
The Zacks Consensus Estimate for Welltower’s bottom line for the to-be-reported quarter is pegged at 89 cents per share, indicating 6% year-over-year growth. It has remained stable over the past week. The consensus estimate for WELL’s revenues is pegged at $1.6 billion, suggesting a 10.8% increase from a year ago.
OneMain Holdings, Inc. (OMF - Free Report) has an Earnings ESP of +1.93% and a Zacks Rank of 3.
The Zacks Consensus Estimate for OneMain’s bottom line for the to-be-reported quarter is pegged at $1.50 per share. The consensus estimate for revenues is pegged at $908.4 million, indicating a 1.5% increase from a year ago. OMF beat earnings estimates in two of the past four quarters and missed twice.
KKR & Co. Inc. (KKR - Free Report) has an Earnings ESP of +1.25% and a Zacks Rank of 3.
The Zacks Consensus Estimate for KKR’s bottom line for the to-be-reported quarter is pegged at 80 cents per share, which increased by 2 cents in the past week. KKR beat earnings estimates in all the past four quarters, with an average surprise of 7.5%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.