Synchrony (SYF) Up 14.4% Since Last Earnings Report: Can It Continue?

Core Viewpoint - Synchrony reported strong Q3 2024 earnings, driven by effective expense management and a growing loan receivables portfolio, leading to a positive outlook for the company despite some challenges in consumer spending [2][3][21] Financial Performance - Adjusted earnings per share (EPS) for Q3 2024 were $1.94, exceeding the Zacks Consensus Estimate of $1.77 and up from $1.48 a year ago [2] - Net interest income rose 5.7% year over year to $4.6 billion, surpassing the consensus mark by 2.1% [2] - Total loan receivables increased 4% year over year to $102.2 billion, although it fell short of the consensus estimate of $103.3 billion [4] - Total deposits grew 5.4% year over year to $82.3 billion, but also missed estimates [5] Expense Management - Total other expenses increased 3% year over year to $1.19 billion, remaining below the estimate of $1.21 billion [7] - The efficiency ratio improved by 200 basis points year over year to 31.2%, which is below the consensus mark of 32.78% [7] Loan and Purchase Volume - Purchase volume declined 4% year over year to $45 billion due to selective consumer spending and credit actions, missing the consensus estimate of $46.5 billion [5] - New accounts decreased by 18% year over year to 4.7 million, while average active accounts remained stable at 70.4 million [6] Capital Deployment - Synchrony returned $300 million through share buybacks and paid $99 million in common stock dividends during Q3 2024, with a remaining buyback capacity of $700 million [15] Guidance and Outlook - For 2024, Synchrony expects EPS in the range of $8.45-$8.55, up from the previous estimate of $7.60-$7.80, reflecting a positive adjustment from the 2023 level of $5.19 [16] - The company anticipates low single-digit decreases in purchase volumes and loan receivables growth for Q4, with net interest income expected to remain flat sequentially [17] - The net charge-off rate is expected to be lower in the second half of the year compared to the first half [18] Market Sentiment - There has been a notable upward trend in consensus estimates, with a shift of 43.7% in the past month, indicating positive investor sentiment [19] - Synchrony holds a Zacks Rank 1 (Strong Buy), suggesting expectations for above-average returns in the coming months [21]