Synchrony Financial SYF will continue to benefit from several buyouts and alliances, a successful CareCredit platform, a suite of advanced digital solutions, cost reduction efforts and a strong financial position.
Zacks Ranking and Price Performance
Synchrony Financial currently carries a Zacks Rank # 3 (Hold).
The stock gained 35.5% in one year compared to the industry and financial sector rally of 17% and 23.5%, respectively. The S&P 500 composite rose 29% during this period.
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Surprise history of impressive earnings
SYF’s profits have exceeded estimates in each of the past four quarters, with an average surprise of 26.97%.
Solid growth outlook
The expected long-term profit growth rate is set at 23%, better than the industry average of 17.2%.
Revision of positive estimate
Zacks’ consensus estimate for 2022 earnings has moved north 1.1% in the past 60 days.
Robust return on equity
Synchrony Financial’s ROE for the past 12 months is 30.6%, which is still above the industry average of 22.3%. This reflects SYF’s efficiency in using its shareholders’ funds.
Business tail winds
As a leading consumer financial services company, Synchrony Financial continues to undertake a series of acquisitions, partnerships and expansion of alliances with established retailers and manufacturers with the goal of diversifying its offerings from products. Some of SYF’s notable renewals in 2021 include those with CITGO, Ashley HomeStore, 4 Wheel Parts, and Mattress Firm.
SYF has partnered with digital leaders like PayPal and Amazon, which has given a boost to its digital capabilities. A strong digital branch comprising enhanced consumer finance solutions aims to facilitate point-of-sale finance and provide seamless shopping experiences for customers.
Providing greater financial flexibility to its clients when making purchases has always been a priority for Synchrony Financial. The company seeks to deliver the same by offering a diverse line of credit cards, trade credit products and consumer installment loans. Interest income from these products remains the main source of income for SYF. The company’s CareCredit platform also deserves special mention.
The Synchrony Financial solution (CareCredit) has strengthened its focus on serving healthcare systems. In December 2021, the platform announced its integration into Sycle, the leading practice management platform for the hearing industry. The integration will serve a dual purpose: to help save time for hearing care practices and provide a financial option for patients, which will result in a hassle-free hearing care purchase. A few months ago, CareCredit forged an alliance with Epic App Orchard with the aim of extending the availability of the SYF solution to healthcare organizations. It should be mentioned that the CareCredit credit card is accepted by registered providers and health-focused retail outlets totaling over 250,000, which aim to provide a wide range of health and wellness services.
Additionally, Synchrony Financial has undertaken cost reduction initiatives, which have been successful in reducing operating expenses by 7% in the first nine months of 2021 year over year. By the end of 2021, the initiative is expected to save SYF around $ 210 million.
A strong liquidity position allows Synchrony Financial to service its short-term debt obligations. SYF has strong cash generation capabilities, allowing it to pursue significant business investments and tactical capital deployment movements through share buybacks and dividend payments. Recently, its board of directors authorized a $ 1 billion increase in the existing share buyback plan, bringing the total authorization amount to $ 2.2 billion.
Actions to consider
Some actions that are better ranked in the financial space are Houlihan Lokey, Inc. HLI, Opportunity Financial Company OPRT and Moody’s Corporation MCO. While Opportun Financial has a Zacks Rank # 1 (strong buy), Houlihan Lokey and Moody’s currently have a Zacks Rank # 2 (buy). You can see The full list of today’s Zacks # 1 Rank stocks here.
Houlihan Lokey’s profits have beaten estimates in each of the past four quarters, with the average surprise being 39.53%. Zacks’ consensus estimate for HLI’s earnings in 2022 has risen 2.3% northward in the past 30 days. HLI has a Growth Score of A.
Opportun Financial’s net income has exceeded estimates in each of the past four quarters, with an average surprise of 452.71%. The consensus mark for OPRT earnings in 2022 shows growth of 7.9% over the figure released a year ago. Estimates have also moved north 8.1% in the past 60 days. OPRT has a growth score of B.
Moody’s earnings have exceeded estimates in three of the past four quarters and have missed once, with an average surprise of 16.34%. Zacks’ consensus estimate for MCO’s earnings in 2022 suggests a 3% increase over the figure released the year before, while the same for revenue indicates growth of 7.9%. The consensus mark for next year’s MCO earnings has moved north 0.4% in the past 30 days.
Houlihan Lokey, Oportun Financial and Moody’s shares gained 58.8%, 7.7% and 39.9% respectively in one year.
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