Synchrony (SYF) Down 12.6% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Synchrony (SYF - Free Report). Shares have lost about 12.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Synchrony due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Synchrony Financial’s Q3 Earnings Beat, Improves Y/Y

Synchrony Financial’s third-quarter 2018 earnings per share of 91 cents surpassed the Zacks Consensus Estimate of 80 cents by 13.7%. The bottom line also improved 30% year over year, primarily backed by better strong loan receivables growth and purchase volume.

Results in Detail

The company’s net interest income increased 9% to $4.2 billion in the second quarter, primarily owing to strong loan receivables growth. In the quarter under review, the company bought the U.S. PayPal Credit financing program, acquiring $7.6 billion in receivables.

However, other income was down by 13% year over year due to loyalty programs.

Loan receivables rose 14% year over year to $88 billion.

Deposits were $62 billion, up 14% from the year-ago quarter’s level.

Purchase volume expanded 11% from the third quarter of 2017 to $36 billion.

Provision for loan loss increased 11% year over year to $1.5 billion due to the PayPal Credit reserve build, which is again partially offset by moderating credit trends.

Total other expenses increased 10% to $1.1 billion, primarily due to the PayPal Credit program purchase and other growth-related expenses.

The company renewed and added collaborations, expanded its digital capabilities as well as enhanced its CareCredit network in the reported quarter.

Sales Platforms Update

Retail Card

In the third quarter of 2018, period-end loan receivables grew 16% to $60.5 billion due to the PayPal Credit program buyout.

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