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Bread Financial Rallies 72.2% YTD: Can the Stock Retain the Bull Run?
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Bread Financial Holdings, Inc. (BFH - Free Report) shares have surged 72.2% in the year-to-date period compared with the industry's growth of 8.9%. The Finance sector and the Zacks S&P 500 index have returned 13.8% and 15.7% in the said time frame, respectively. With a market capitalization of $2.82 billion, the average volume of shares traded in the last three months was 0.8 million.
BFH Outperforms Industry, Sector, S&P 500
Image Source: Zacks Investment Research
The rally was largely driven by higher retained earnings, active risk management, solid consumer spending and capital deployment. Bread Financial has a VGM Score of A. The VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum.
This Financial Transaction Services stock carries a Zacks Rank #3 (Hold) at present. The company’s earnings beat estimates in three of the trailing four quarters and missed once, delivering an average surprise of 84.37%.
Optimistic Analyst Sentiment on BFH
Two of the six analysts covering the stock have raised estimates for 2024, and two of the seven analysts have raised the same for 2025 over the past 30 days. Thus, the Zacks Consensus Estimate for 2024 and 2025 moved 7.5% and 3.9% north, respectively, in the last 30 days.
The long-term earnings growth is expected to be 39.2%, better than the industry average of 17.7%.
Will BFH’s Rally Stay?
The credit sales performance is expected to improve on the back of solid consumer spending. With the continued growth of credit sales, average loans are likely to increase. With new partner additions and holiday spending, BFH continues to expect strong credit sales.
Credit metrics should remain strong with delinquency and net loss rates remaining below the historical averages. Given disciplined, proactive risk management and strong consumer payment behavior, net loss rates are expected to remain low.
BFH is prudently investing in strategic growth areas and ramping up marketing spending in growth verticals and digital innovation and technology enhancements. Bread Financial stated that ramping up its digital and technology capabilities remains a top priority this year. It has strategic relationships leveraging BFH’s versatile mono platform, including RBC, Fiserv and Sezzle.
The company has been strengthening its balance sheet and lowering debt. Notably, its free cash flow conversion has been impressive over the last several quarters, reflecting its solid earnings. Leverage improved to less than 115% at the end of second-quarter 2024 from 400% three years back. Bread Financial also intends to pay $100 million remaining in its 2026 bonds by this year to further improve leverage.
BFH remains focused on returning value to its shareholders. It uses share repurchases as a tool to mitigate the adverse impact of foreign exchange and intends to focus more on share buybacks and mergers and acquisitions.
Risks
However, Bread Financial has been witnessing a rise in non-interest expenses for the past few years. The company expects the net loss rate to be in the low 8% range for 2024, increasing in the second quarter at around 9% as inflation continues to pressure consumers’ ability to pay and moderate their spending. Nonetheless, the company expects a lower loss rate in the second half of 2024 compared with the first half.
The Zacks Consensus Estimate for Adyen’s 2024 and 2025 earnings implies year-over-year growth of 29.1% and 24.7%, respectively. Year to date, ADYEY has gained 9.3%.
The Zacks Consensus Estimate for ADYEY’s 2024 and 2025 earnings has moved 6.8% and 5.4% north in the past 60 days.
The Zacks Consensus Estimate for Expensify’s 2024 and 2025 earnings implies year-over-year growth of 3,300 % and 28.1%, respectively. Year to date, EXFY has lost 9.3%.
The Zacks Consensus Estimate for EXFY’s 2024 and 2025 earnings has moved 28% and 5.1% north in the past 60 days.
Remitly Global beat estimates in two of the last four quarters and missed in the other two, the average being 8.01%. Year to date, RELY has lost 29.2%.
The Zacks Consensus Estimate for RELY’s 2024 and 2025 earnings implies year-over-year growth of 53.8% and 24.793.3%, respectively.
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Bread Financial Rallies 72.2% YTD: Can the Stock Retain the Bull Run?
Bread Financial Holdings, Inc. (BFH - Free Report) shares have surged 72.2% in the year-to-date period compared with the industry's growth of 8.9%. The Finance sector and the Zacks S&P 500 index have returned 13.8% and 15.7% in the said time frame, respectively. With a market capitalization of $2.82 billion, the average volume of shares traded in the last three months was 0.8 million.
BFH Outperforms Industry, Sector, S&P 500
Image Source: Zacks Investment Research
The rally was largely driven by higher retained earnings, active risk management, solid consumer spending and capital deployment.
Bread Financial has a VGM Score of A. The VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum.
This Financial Transaction Services stock carries a Zacks Rank #3 (Hold) at present. The company’s earnings beat estimates in three of the trailing four quarters and missed once, delivering an average surprise of 84.37%.
Optimistic Analyst Sentiment on BFH
Two of the six analysts covering the stock have raised estimates for 2024, and two of the seven analysts have raised the same for 2025 over the past 30 days. Thus, the Zacks Consensus Estimate for 2024 and 2025 moved 7.5% and 3.9% north, respectively, in the last 30 days.
The long-term earnings growth is expected to be 39.2%, better than the industry average of 17.7%.
Will BFH’s Rally Stay?
The credit sales performance is expected to improve on the back of solid consumer spending. With the continued growth of credit sales, average loans are likely to increase. With new partner additions and holiday spending, BFH continues to expect strong credit sales.
Credit metrics should remain strong with delinquency and net loss rates remaining below the historical averages. Given disciplined, proactive risk management and strong consumer payment behavior, net loss rates are expected to remain low.
BFH is prudently investing in strategic growth areas and ramping up marketing spending in growth verticals and digital innovation and technology enhancements. Bread Financial stated that ramping up its digital and technology capabilities remains a top priority this year. It has strategic relationships leveraging BFH’s versatile mono platform, including RBC, Fiserv and Sezzle.
The company has been strengthening its balance sheet and lowering debt. Notably, its free cash flow conversion has been impressive over the last several quarters, reflecting its solid earnings. Leverage improved to less than 115% at the end of second-quarter 2024 from 400% three years back. Bread Financial also intends to pay $100 million remaining in its 2026 bonds by this year to further improve leverage.
BFH remains focused on returning value to its shareholders. It uses share repurchases as a tool to mitigate the adverse impact of foreign exchange and intends to focus more on share buybacks and mergers and acquisitions.
Risks
However, Bread Financial has been witnessing a rise in non-interest expenses for the past few years. The company expects the net loss rate to be in the low 8% range for 2024, increasing in the second quarter at around 9% as inflation continues to pressure consumers’ ability to pay and moderate their spending. Nonetheless, the company expects a lower loss rate in the second half of 2024 compared with the first half.
Stocks to Consider
Some better-ranked stocks from the financial transaction service providers
are Adyen N.V. Unsponsored ADR (ADYEY - Free Report) , Expensify, Inc. (EXFY - Free Report) and Remitly Global, Inc. (RELY - Free Report) , each carrying a Zacks Rank #3 (Hold) each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Adyen’s 2024 and 2025 earnings implies year-over-year growth of 29.1% and 24.7%, respectively. Year to date, ADYEY has gained 9.3%.
The Zacks Consensus Estimate for ADYEY’s 2024 and 2025 earnings has moved 6.8% and 5.4% north in the past 60 days.
The Zacks Consensus Estimate for Expensify’s 2024 and 2025 earnings implies year-over-year growth of 3,300 % and 28.1%, respectively. Year to date, EXFY has lost 9.3%.
The Zacks Consensus Estimate for EXFY’s 2024 and 2025 earnings has moved 28% and 5.1% north in the past 60 days.
Remitly Global beat estimates in two of the last four quarters and missed in the other two, the average being 8.01%. Year to date, RELY has lost 29.2%.
The Zacks Consensus Estimate for RELY’s 2024 and 2025 earnings implies year-over-year growth of 53.8% and 24.793.3%, respectively.