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

Zacks Equity Research

Synchrony Financial SYF will release fourth-quarter 2018 results on Jan 23, 2019, before the market opens. In the last reported quarter, the company delivered a positive earnings surprise of 13.7%, backed by better strong loan receivables growth and purchase volume.

Let’s see, how things are shaping up prior to this announcement.

Earnings Catalysts for Q4

The Zacks Consensus Estimate for earnings is pegged at 93 cents, up 32.9% year over year. The company’s performance has been likely driven by higher purchase volume, constant efforts in boosting its portfolio, digital innovation, etc.

Synchrony Financial’s Retail Card platform is likely to have continued its winning streak with rising card sales, which in turn, has contributed to the company’s revenue growth. The Zacks Consensus Estimate for revenues is pegged at $4.2 billion, reflecting a year-over-year increase of 6.8%.

The company’s online purchases might also have witnessed growth because of its solid collaborations to provide customers with better purchasing options. Strategic moves such as strengthening its relationship with Qurate Retail Group have also helped it boost portfolio and drive sales through a solid customer offering.

However, the company is anticipated to have suffered high costs due to investments in sales platforms, alliances, etc.

The company expected that net interest margin would contract in the 15.75-16% range during the fourth quarter. Reserve build is expected to be in the $75-$100 million band during the quarter under review.

Synchrony Financial has likely continued with its disciplined way of capital deployment during the fourth quarter of 2018.

What the Quantitative Model Predicts

Our proven model does not conclusively show that Synchrony Financial is likely to beat on earnings this to-be-reported quarter. This is because the stock needs to have the right combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you can see below.

Earnings ESP: Synchrony Financial has an Earnings ESP of -0.81%. This is because the Most Accurate Estimate is pegged at $0.92, lower than the Zacks Consensus Estimate of $0.93. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Synchrony Financial Price, Consensus and EPS Surprise

Synchrony Financial Price, Consensus and EPS Surprise | Synchrony Financial Quote

Zacks Rank: Synchrony Financial carries a Zacks Rank #3, which increases the predictive power of ESP. However, a stock requires a positive ESP to be confident about a likely earnings surprise. Therefore, this combination leaves surprise prediction inconclusive.

We caution against the Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Some stocks worth considering from the finance sector with the perfect combination of elements to surpass estimates in the next releases are as follows:

BofI Holding, Inc. AX is set to report fourth-quarter earnings on Jan 29. This stock with a Zacks Rank of 3 has an Earnings ESP of +5.22%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cboe Global Markets, Inc. CBOE has an Earnings ESP of +1.93%. This Zacks Rank #2 company is scheduled to release fourth-quarter earnings on Feb 2.

Brown & Brown, Inc. BRO is slated to announce fourth-quarter earnings on Jan 28. The stock has an Earnings ESP of +5.38% and a Zacks Rank of 1.

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