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What's in Store for Synchrony Financial (SYF) Q4 Earnings?

Zacks Equity Research

Synchrony Financial SYF will release fourth-quarter 2019 results on Jan 24, before the market opens.

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is pegged at $1.08 cents, suggesting a 0.9% dip from the year-ago reported figure, mainly due to lower revenues.

In the last reported quarter, the company delivered a positive surprise of 8.9%, backed by higher net interest income excluding the impact of the Walmart portfolio. The bottom line also surged 34% year over year.

Key Catalysts for Q4 Earnings

The company’s revenues might have been affected by lower net interest income in the quarter under review. The Zacks Consensus Estimate for the metric is pegged at $3.9 billion, indicating a 9.2% downfall from the year-ago reported figure.

Net interest margin is generally lower in the fourth quarter, evident from the past couple of years’ trend that most likely continued in the to-be-reported quarter as well. Per the last earnings call, the metric is expected to contract 50 bps, coming in at 15.5%.

Synchrony Financial is expected to have endured elevated expenses due to investments in sales platforms. Also, higher marketing expenses might have weighed down its margins to some extent.

However, the company’s digital sales are likely to have witnessed consistent growth in the quarter under discussion.

On account of reduction related to the Walmart Portfolio, the impending quarterly results might reflect lower loan loss reserve by $35-$40 million. The consensus mark for allowance for loan losses implies an 11.4% decline from the year-earlier reported number.

The fourth quarter is likely to have witnessed core reserve bill in the range of $100-$150 million, driven by growth.

Synchrony Financial is expected to have continued with capital deployment for addition of shareholder value. Steady capital allocation in the period is likely to have provided an additional impetus to the company’s bottom line.

What the Quantitative Model Predicts

Our proven model doesn’t conclusively predict an earnings beat for Synchrony Financial this reporting cycle. This is because the stock needs the right combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to increase the odds of a positive surprise. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Synchrony Financial has an Earnings ESP of +3.78%. This is because the Most Accurate Estimate is pegged at $1.12, higher than the Zacks Consensus Estimate of $1.08. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Synchrony Financial Price and EPS Surprise

Synchrony Financial Price and EPS Surprise

Synchrony Financial price-eps-surprise | Synchrony Financial Quote

Zacks Rank: Synchrony Financial carries a Zacks Rank #4 (Sell), which decreases the predictive power of ESP. Therefore, this combination leaves surprise prediction inconclusive.

Stocks to Consider

Some stocks worth considering from the finance sector with a perfect mix of elements to surpass estimates in the upcoming quarterly releases are as follows:

Global Payments Inc. GPN is slated to announce fourth-quarter earnings on Feb 12. The stock has an Earnings ESP of +3.15% and a Zacks Rank #2.

Fidelity National Information Services, Inc. FIS is set to report fourth-quarter earnings on Feb 13. The stock has a Zacks Rank of 2 and an Earnings ESP of +0.45 %.

Square, Inc. SQ has an Earnings ESP of +6.14% and a Zacks Rank #3. The company is scheduled to release fourth-quarter earnings on Feb 26.

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