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Can Higher Expenses Affect Synchrony's (SYF) Q4 Earnings?
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Synchrony Financial (SYF - Free Report) is set to report its fourth-quarter 2023 results on Jan 23, before the opening bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for fourth-quarter earnings per share of 96 cents suggests a 23.8% decrease from the prior-year figure of $1.26. The consensus mark remained stable over the past week. The consensus estimate for fourth-quarter revenues of $4.5 billion indicates an 8.4% 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 5.5%. 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.
Q3 Earnings Rewind
The consumer financial services company reported adjusted earnings of $1.48 per share for the previous quarter, beating the Zacks Consensus Estimate by 2.8%. 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.
Synchrony is expected to have benefited from higher purchase volume, loan receivables and active accounts in the fourth quarter. Also, 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 4.5% year over year, while our model predicts a more than 7% 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 3% year over year in the fourth quarter.
The financial service provider is expected to have witnessed an increase in Average Interest-Earning Assets. The consensus estimate indicates an 11.4% increase in the metric from the year-ago period, whereas our estimate suggests more than 10% growth. The Zacks Consensus Estimate for the efficiency ratio is pegged at 33.56%, indicating a decline from the prior-year reported figure of 37.20%.
While the above-mentioned factors are likely to have benefited the company in the fourth 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 information processing and marketing and business development expenses in the fourth quarter.
Our estimate for total non-interest expenses for the quarter is pegged at nearly $1.2 billion. Also, we expect a significant increase in provision for credit losses 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 15.11%, down from 15.58% a year ago, while our estimate suggests a net interest margin of 15.13%. 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 -8.26%. This is because the Most Accurate Estimate currently stands at 88 cents per share, lower than the Zacks Consensus Estimate of 96 cents.
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:
The Zacks Consensus Estimate for Coinbase’s bottom line for the to-be-reported quarter suggests a 95.1% year-over-year improvement. The estimate improved by 4 cents over the past week. COIN beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 63%.
Chubb Limited (CB - Free Report) has an Earnings ESP of +0.65% and is a Zacks #2 Ranked player.
The Zacks Consensus Estimate for Chubb’s bottom line for the to-be-reported quarter indicates a 24.2% year-over-year increase. The estimate increased by 3 cents over the past week. Furthermore, the consensus mark for CB’s revenues is pegged at $12.9 billion, suggesting 10.2% growth from a year ago.
Brookfield Asset Management Ltd. (BAM - Free Report) has an Earnings ESP of +0.69% and a Zacks Rank of 3.
The Zacks Consensus Estimate for Brookfield Asset Management’s bottom line for the to-be-reported quarter indicates 9.7% growth from the year-ago period. BAM beat earnings estimates twice in the past four quarters and missed on the other two occasions, with an average surprise of 0.2%.
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Can Higher Expenses Affect Synchrony's (SYF) Q4 Earnings?
Synchrony Financial (SYF - Free Report) is set to report its fourth-quarter 2023 results on Jan 23, before the opening bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for fourth-quarter earnings per share of 96 cents suggests a 23.8% decrease from the prior-year figure of $1.26. The consensus mark remained stable over the past week. The consensus estimate for fourth-quarter revenues of $4.5 billion indicates an 8.4% 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 5.5%. 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.
Q3 Earnings Rewind
The consumer financial services company reported adjusted earnings of $1.48 per share for the previous quarter, beating the Zacks Consensus Estimate by 2.8%. 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 fourth-quarter earnings announcement.
Q4 Factors to Note
Synchrony is expected to have benefited from higher purchase volume, loan receivables and active accounts in the fourth quarter. Also, 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 4.5% year over year, while our model predicts a more than 7% 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 3% year over year in the fourth quarter.
The financial service provider is expected to have witnessed an increase in Average Interest-Earning Assets. The consensus estimate indicates an 11.4% increase in the metric from the year-ago period, whereas our estimate suggests more than 10% growth. The Zacks Consensus Estimate for the efficiency ratio is pegged at 33.56%, indicating a decline from the prior-year reported figure of 37.20%.
While the above-mentioned factors are likely to have benefited the company in the fourth 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 information processing and marketing and business development expenses in the fourth quarter.
Our estimate for total non-interest expenses for the quarter is pegged at nearly $1.2 billion. Also, we expect a significant increase in provision for credit losses 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 15.11%, down from 15.58% a year ago, while our estimate suggests a net interest margin of 15.13%. 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 -8.26%. This is because the Most Accurate Estimate currently stands at 88 cents per share, lower than the Zacks Consensus Estimate of 96 cents.
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:
Coinbase Global, Inc. (COIN - Free Report) has an Earnings ESP of +160.61% 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 Coinbase’s bottom line for the to-be-reported quarter suggests a 95.1% year-over-year improvement. The estimate improved by 4 cents over the past week. COIN beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 63%.
Chubb Limited (CB - Free Report) has an Earnings ESP of +0.65% and is a Zacks #2 Ranked player.
The Zacks Consensus Estimate for Chubb’s bottom line for the to-be-reported quarter indicates a 24.2% year-over-year increase. The estimate increased by 3 cents over the past week. Furthermore, the consensus mark for CB’s revenues is pegged at $12.9 billion, suggesting 10.2% growth from a year ago.
Brookfield Asset Management Ltd. (BAM - Free Report) has an Earnings ESP of +0.69% and a Zacks Rank of 3.
The Zacks Consensus Estimate for Brookfield Asset Management’s bottom line for the to-be-reported quarter indicates 9.7% growth from the year-ago period. BAM beat earnings estimates twice in the past four quarters and missed on the other two occasions, with an average surprise of 0.2%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.