Synchrony Financial (NYSE:SYF) SYF will continue benefiting from several buyouts and alliances, a well-performing CareCredit platform, an advanced digital solutions suite, cost-curbing efforts and a strong financial position.
Zacks Rank & Price Performance
Synchrony Financial carries a Zacks Rank #3 (Hold) at present.
The stock has gained 35.5% in a year compared with the industry’s and the Finance sector’s rally of 17% and 23.5%, respectively. The S&P 500 composite has risen 29% in the said time frame.
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Impressive Earnings Surprise History
SYF’s earnings beat estimates in each of the trailing four quarters, the average surprise being 26.97%.
Solid Growth Prospect
The expected long-term earnings growth rate is pegged at 23%, better than the industry’s average of 17.2%.
Positive Estimate Revision
The Zacks Consensus Estimate for 2022 earnings has moved north by 1.1% in the past 60 days.
Robust Return on Equity
The ROE of Synchrony Financial for the trailing 12 months is 30.6%, which remains higher than the industry average of 22.3%. This reflects SYF’s efficiency in utilizing its shareholders’ funds.
Business Tailwinds
Being a leading consumer financial services company, Synchrony Financial continues to undertake a series of acquisitions, partnerships and expansion of alliances with well-established retailers and manufacturers in a bid to diversify its product offerings. Some of the notable renewals of SYF in 2021 include those with CITGO, Ashley HomeStore, 4 Wheel Parts and Mattress Firm.
SYF has partnered with digital leaders like PayPal (NASDAQ:PYPL) and Amazon (NASDAQ:AMZN), which has provided a boost to its digital capabilities. A strong digital arm comprising upgraded consumer financing solutions intends to ease financing at the point of sale and offer seamless shopping experiences to customers.
Offering greater financial flexibility to its customers while conducting purchases has always been prioritized by Synchrony Financial. The company seeks to provide the same by offering a varied suite of credit cards, commercial credit products and consumer installment loans. Interest income earned from these products remains the primary source of income for SYF. The company’s CareCredit platform also deserves a special mention.
The Synchrony Financial solution (CareCredit) has reinforced its focus on serving healthcare systems. In December 2021, the platform announced its integration into the leading hearing industry’s practice management platform, Sycle. The integration will serve a dual purpose — help hearing healthcare practices save time and offer a financial option to patients thereby resulting in hassle-free procurement of hearing care. A few months back, CareCredit forged an alliance with Epic App Orchard in a bid to expand availability of SYF’s solution to healthcare organizations. It is worth mentioning that the CareCredit credit card is accepted across enrolled provider and health-focused retail locations totaling over 250,000, which are aimed at offering a wide array of health and wellness services.
Additionally, Synchrony Financial has undertaken cost-cutting initiatives, which have successfully reduced its operating expenses by 7% in the first nine months of 2021 on a year-over-year basis. By the end of 2021, the initiative is expected to save expenses of roughly $210 million for SYF.
A strong liquidity position enables Synchrony Financial to service its short-term debt obligations. SYF has robust cash-generating abilities in place, thus allowing it to pursue significant business investments and tactical capital-deployment moves via share buybacks and dividend payments. Recently, its board of directors authorized an increase of $1 billion to the existing share repurchase plan, thereby bringing the total amount of authorization to $2.2 billion.
Stocks to Consider
Some better-ranked stocks in the finance space are Houlihan Lokey (NYSE:HLI), Inc. HLI, Oportun Financial (NASDAQ:OPRT) Corporation OPRT and Moody's (NYSE:MCO) Corporation MCO. While Oportun Financial sports a Zacks Rank #1 (Strong Buy), Houlihan Lokey and Moody’s carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Houlihan Lokey’s earnings surpassed estimates in each of the last four quarters, the average surprise being 39.53%. The Zacks Consensus Estimate for HLI’s 2022 earnings has moved north by 2.3% in the past 30 days. HLI has a Growth Score of A.
The bottom line of Oportun Financial surpassed estimates in each of the trailing four quarters, the average surprise being 452.71%. The consensus mark for OPRT’s 2022 earnings indicates 7.9% growth from the year-ago reported figure. The estimates have also moved north by 8.1% in the past 60 days. OPRT has a Growth Score of B.
Moody’s earnings outpaced estimates in three of the last four quarters and missed once, the average surprise being 16.34%. The Zacks Consensus Estimate for MCO’s 2022 earnings suggests a 3% rise from the prior-year reported figure, while the same for revenues indicates growth of 7.9%. The consensus mark for MCO’s earnings of next year has moved north by 0.4% in the past 30 days.
Shares of Houlihan Lokey, Oportun Financial and Moody’s have gained 58.8%, 7.7% and 39.9%, respectively, in a year.
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