Will Synchrony Financial (SYF) Disappoint In Q3 Earnings?
Zacks Investment Research | Oct 17, 2017 08:44AM ET
Synchrony Financial (NYSE:SYF) will release third-quarter 2017 results on Oct 20, 2017 before the market opens.
The company’s growing allowance for loan losses are likely to impact the third quarter earnings negatively. Despite improving credit metrics, the company expects an increase in its allowance for loan losses at an interim period end compared to the prior-year end, reflecting seasonal trends. The Zacks Consensus Estimate is currently pegged at $5.3 billion, reflecting 30% year-over-year growth.
However, the uptrend in total interest and fees on loans is expected to continue in the third quarter as well, driven primarily by the Retail Card platform. The Zacks Consensus Estimate for total interest and fees on loans is pegged at $4.1 billion, reflecting 8.7% growth from the prior-year period.
As the company continues to generate positive operating leverage that is favorably impacting the efficiency ratio. It expects the efficiency ratio to remain close to 31.5% for the full year. For the third quarter, the Zacks Consensus Estimate is pegged at 31%, reflecting a year-over-year improvement of 40 basis points.
Other Factors
Apart from increasing interest and fees on loans, strong deposit generation, loan receivables as well as increased online purchases are likely to drive revenues this quarter.
The company’s revenues are also expected to increase on the back of rising CareCredit receivables this quarter.
Strong value propositions and promotional offers in the cards are likely to boost active accounts growth, in turn, driving revenues.
However, continued strong growth in lower yielding payment solution receivables is expected to put pressure on margins in the to-be-reported quarter.
An increase in spending on strategic investments is expected drain the bottom line in the third quarter.
Earnings Whispers
Our proven model does not conclusively show that Synchrony Financial will beat on earnings this quarter. This is because a stock needs to have both a positive Original post
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