Synchrony Financial's (SYF) Q4 Earnings Beat, Increase Y/Y

Synchrony Financial’s (NYSE:SYF) fourth-quarter 2018 earnings per share of $1.09 surpassed the Zacks Consensus Estimate by 17.2%. The bottom line also improved 55.7% year over year on the back of PayPal Credit program acquisition and robust loan receivables growth.

Results in Detail

The company’s net interest income increased 11% to $4.3 billion in the fourth quarter, primarily owing to strong loan receivables growth and purchase of PayPal Credit program.

Other income was up by $2 million to $64 million.

In the quarter under review, loan receivables rose 14% year over year to $93 billion.

Deposits were $64 billion, up 13% from the year-ago quarter.

Purchase volume expanded 10% from the fourth quarter of 2017 to $40 billion.

Provision for loan loss increased 7% year over year to $98 million on the back of PayPal Credit

program reserve. However, it was partially offset by moderating credit trends.

Total other expenses rose 11% to $1078 million, primarily due to PayPal Credit program acquisition and costs related to growth.

Sales Platforms Update

Retail Card

Interest and fees on loans of the company grew 14% year over year.

Loan receivables grew 16% while average active accounts climbed 9%, all driven by the company’s buyout of PayPal Credit program.

Payment Solutions

Interest and fees on loans rose 9% year over year on the back of period-end loan receivables growth. Loan receivables grew 9%, led by home furnishings and luxury.

Purchase volume expanded 8% while average active account rose 7%.

CareCredit

Interest and fees on loans increased 7% year over year, attributable to loan receivables growth. Loan receivables growth of 7% was enhanced by dental and veterinary.

While purchase volume registered 7% growth, average active account reported a 4% rise.

Full-Year Highlights

For 2018, net interest income of the company rose 7.3% to $16.1 billion. Earnings per share of the company improved 42.7% to $3.74.

Financial Position

Total assets as of Dec 31, 2018 were $106.7 billion, up 11.4% year over year.

Total borrowings as of Dec 31, 2018 were nearly $24 billion, up 14.9% year over year.

The company’s balance sheet remained strong during the reported quarter with total liquidity of $19 billion, or 18% of total assets.

Return on assets was 2.9% while return on equity was 21.5%.

Efficiency ratio was 30.4% compared with 30.3% in fourth-quarter 2017.

Zacks Rank

Synchrony Financial carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peer Releases From Finance Sector

Discover Financial Services (NYSE:DFS) is set to release fourth-quarter earnings on Jan 24 and the consensus mark for the same stands at $2.09 per share, representing an improvement from $1.55 in the year-ago period. The stock carries a Zacks Rank of 3.

Cboe Global Markets, Inc. (NYSE:CBOE) is scheduled to release fourth-quarter earnings on Feb 2. The Zacks Consensus Estimate for the same is pegged at $1.35, reflecting a year-over-year rise of 55.2%. The stock has a Zacks Rank #2 (Buy).

Brown & Brown, Inc. (NYSE:BRO) is slated to announce fourth-quarter earnings on Jan 28. The consensus estimate for earnings is 27 cents, up from 25 cents in the prior-year quarter. The stock carries a Zacks Rank of 2.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?

From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.

This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.

See Stocks Today >>