Synchrony Financial (SYF) Q1 Earnings: What's In The Cards?

Synchrony Financial (NYSE:SYF) will release first-quarter 2018 results on Apr 20, 2018, before the market opens. Last quarter, the company delivered a positive earnings surprise of 11.11%.

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

Factors to be Considered This Quarter

Synchrony Financial expects a rise in its allowance for loan losses from the prior-year period due to seasonal trends and catastrophic events. This is expected to adversely impact first-quarter results.

Nonetheless, continuing with the previous trend, the company’s total interest and fees on loans are expected to increase in the first quarter on the back of the Retail Card platform and loan receivables growth.

Revenues in the to be reported quarter is likely to be driven by strong deposit generation, loan receivables and increased online purchases, and growing CareCredit receivables. Synchrony Financial’s continuous efforts to drive organic growth through digital innovation, data analytics and innovative marketing plus promotions and value propositions in the cards are anticipated to drive the top line in the quarter to be reported. The Zacks Consensus Estimate for revenues is pegged at $3.9 billion, reflecting 8.3% year over year increase.

The company’s agreement with PayPal during the fourth quarter of 2017 supporting its consistent reach within the rapidly-growing digital payments channel is likely to aid first-quarter results.

Share buybacks and a lower tax incidence due to tax rate cut will likely provide additional boost to the bottom-line.

The Zacks Consensus Estimate for earnings is pegged at 74 cents, increasing 21.3% year over year.

However, increase in lower yielding payment solution receivables is will likely weigh on margin expansion in the first quarter.

Also, a rise in spending on strategic investments is assumed to hurt the bottom line in the to-be-reported quarter.

Earnings Whispers

Our proven model does not conclusively show that Synchrony Financial is likely to beat on earnings this quarter. This is because a stock needs to have both 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 will see below.

Zacks ESP: Synchrony Financial has an Earnings ESP of -2.02%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Synchrony Financial Price and EPS Surprise

Synchrony Financial Price and EPS Surprise | Synchrony Financial Quote

Zacks Rank: Synchrony Financial carries a Zacks Rank #3, which increases the predictive power of ESP. However, a company needs to have a positive ESP to be confident about an earnings surprise. Hence, this combination leaves surprise prediction inconclusive.

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

Stocks to Consider

Here are some companies from the same industry that you may want to consider as these have the right combination of elements to beat estimates this time around:

CIT Group, Inc. (NYSE:CIT) is set to report first-quarter earnings on Apr 24. The company has an Earnings ESP of +1.54% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Moody’s Corporation (NYSE:MCO) has an Earnings ESP of +1.49% and a Zacks Rank of 2. The company is set to report first-quarter earnings on Apr 27.

MoneyGram International Inc (NASDAQ:MGI) has an Earnings ESP of +5.88% and is a Zacks #3 Ranked player. The company is set to report first-quarter earnings on May 3.

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