Synchrony Financial Shares Gains 6.2% on Q1 Beat

Synchrony Financial (NYSE: SYF) shares jumped almost 6.2% on April 18, after the company delivered stellar first-quarter results. Investors further cheered an increase in buybacks and a 5% hike in dividends.

Based in the U.S., Synchrony Financial is a consumer financial services company that offers consumer financing and consumer banking products across industries like digital, retail, home, auto, travel, health, and pets.

The quarterly beat was driven by robust consumer sentiments, driving purchase volume and robust loan growth as well as strong credit trends.

Q1 Beat

The company reported impressive quarterly earnings of $1.77 per share, significantly higher than analysts’ estimates of $1.54 per share and higher than the earnings of $1.73 per share reported for the prior-year period.

Notably, net interest margin climbed to 15.80% in the quarter, up 182 basis points from the year-ago period.

The company reported loans of $83 billion, up from $76.9 billion in the prior-year quarter. Further, average active accounts surged to 70.1 billion, compared to 66.3 million for the prior-year period.

Increased Buybacks & Dividends

Concurrent with the earnings, Synchrony Financial approved an incremental $2.8 billion share repurchase authorization for the period ending June 30, 2023.

This brings the total repurchase authorization to $3.1 billion and includes $250 million pending from previously authorized repurchase programs.

On top of that, the company also plans to hike the quarterly cash dividend by 5%, from $0.22 to $0.23 per share, effective in the third quarter of 2022.

CEO Comments

Synchrony CEO, Brian Doubles, commented, “The scalability of our technology platform, the breadth of our product suite and the depth of our lending insights across many industries, positions us to consistently deliver sustainable and attractive outcomes for all our stakeholders.”

Wall Street’s Take

Despite the quarterly beat, CFRA decreased its price target on Synchrony Financial to $40 from $43 and reiterated a Hold rating.

The rest of the Wall Street community is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on 11 Buys and five Holds. The average Synchrony Financial price target of $46.81 implies 16.9% upside potential to current levels.

Investors Weigh In

Notably, TipRanks’ Stock Investors tool shows that investors currently have a Very Positive stance on Synchrony Financial, with 12.9% of investors increasing their exposure to SYF stock over the past 30 days.

Conclusion

Robust growth in purchase volume across four out of five sales platforms, as well as growth acceleration in loan receivables across all five platforms, reflects strong consumer momentum and credit trends. Furthermore, increased buybacks and dividends imply business strength and management’s confidence in returning incremental value to investors.

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