Synchrony Financial's Strategic Moves Aid, High Costs Hurt

Synchrony Financial’s (NYSE:SYF) has been in investors’ good books owing to a series of acquisitions and strategic alliances that enhanced its capabilities.

The company delivered a positive earnings surprise in all the last four quarters, the average being 11.41%.

The company’s inorganic growth achieved on the back of its M&A activity made over the past many years complemented its organic growth. A series of acquisitions and renewal of alliances have helped the company improve its digital capabilities as well as diversify its business.

In March 2019, Synchrony Financial purchased Pets Best to drive its CareCredit platform and penetrate the pet insurance business as a managing general agent. In the same month, the company announced that its credit card Synchrony Car Care strengthened its acceptance network of merchants by more than 10 times to include more auto-related categories and destinations.

In 2018, Synchrony Financial completed some significant buyouts, such as Loop Commerce, a leader in digital and in-store gifting services, and the consumer credit receivables portfolio of PayPal.

Its sales platform CareCredit recently tied up with Walgreens that boosts CareCredit’s chain of more than 230,000 healthcare providers and retailers across the nation via the acceptance of the CareCredit credit card. By means of this pact, more than 8500 Walgreens and Duane Reade stores will be added to the United States, Puerto Rico and Virgin Islands geographies.

Renewal of collaborations, such as those with Bosley and Suzuki and the new contracts with Lighthouse will help the company enrich its capabilities.

Acquisitions and collaborations have always determined the company’s primary growth trajectory. All these integrations aim at flourishing the company’s business lines that in turn fuel its competitive edge.

However, Synchrony Financial has been witnessing a steep rise in expenses since 2013 that marks its inception. The company has been adopting several organic and inorganic strategies for expansion, which in turn, induced higher marketing expenses and acquisitions-related costs. Alongside, constant investments in digitization caused rising expenditures to weigh on the company’s bottom line before contributing to its top line.

Stocks That Warrant a Look

Investors interested in the finance sector might look at some stocks worth considering like AXA Equitable Holdings, Inc. (NYSE:EQH) , Ally Financial Inc. (NYSE:ALLY) and Cardtronics PLC (NASDAQ:CATM) .

AXA Equitable works as a diversified financial services company worldwide. It delivered average four-quarter beat of 14.02%.

Ally Financial offers various financial products and services. It managed to pull off average positive surprise of 9.4%.

Cardtronics offers automated consumer financial services through its network of automated teller machines and multi-purpose financial services kiosks. The company came up with average four-quarter beat of 37.5%.

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