Core Insights - The current investment landscape is characterized by a focus on capital-intensive cyclicals, undervalued financials, and mature hardware companies, which are perceived as having fragile cash economics [1] - There is a persistent valuation gap between current cash flows and implied terminal values, indicating a market inefficiency [2] Energy & Resources - Equinor (EQNR) leads with a 2.5 Acquirer's Multiple (AM) and a 10.7% free cash flow (FCF) yield, benefiting from low leverage and strong operating income, yet market pricing suggests depressed economics [3] - Petrobras (PBR) has a 4.6 AM and a significant 23.6% shareholder yield, driven by substantial offshore FCF, but governance issues affect market sentiment despite strong intrinsic value arguments [4] Financials - Synchrony Financial (SYF) shows a 2.5 AM and a 9.3% shareholder yield, with negative net leverage and ongoing repurchases, yet credit pessimism prevails [5] - Bank of New York Mellon (BK) trades at a 2.8 AM, appearing undervalued relative to its balance sheet strength and tangible FCF, as the market anticipates a credit event that has not materialized [6] Old-Economy Cyclicals & Industrials - Cyclical companies are undervalued, with the market pricing them as if a downturn is imminent, despite stable operating income and ongoing supply constraints [7] Hardware & Mature Tech - HP Inc. (HPQ) is highlighted with a 6.5 AM and a 15.6% FCF yield, returning significant shareholder value through buybacks, yet the market views it as a declining asset rather than a strong cash generator [8] Capital Returns - Capital returns are primarily driven by buybacks rather than dividends, with companies in energy, financials, and mature industrials reducing share counts using internally generated FCF [10] Macro Context - There is a structural dislocation in valuations, where cash flows and balance sheet strength are strong, but market prices are influenced by macro narratives rather than actual economic performance [12] Bottom Line - Large-cap companies generating robust FCF are trading as if future impairments are certain, creating a fertile opportunity for value investors as the market conflates cyclicality with structural decline [13]

Core Insights - Synchrony Financial reported a record fourth-quarter purchase volume of $49 billion, marking a 3% year-over-year increase, driven by strengthened spending patterns and growth in co-branded cards [2] - The company's CEO noted steady consumer behavior, with increased transaction frequency and average ticket sizes, indicating resilience in consumer spending [4] - The Pay Later product has become integral to Synchrony's strategy, available at over 6,200 merchants, and is associated with at least a 10% increase in sales when combined with revolving credit [5][6] Financial Performance - Overall card activity showed broad improvement, with co-brand and dual cards accounting for about half of the fourth-quarter purchase volume and growing 16% year-over-year [7] - Digital platform purchase volume rose by 6%, while health and wellness spending increased by 4%, reflecting trends in consumer preferences [8] - Revenues for the quarter were approximately $3.8 billion, slightly below consensus expectations, leading to a 6% drop in shares during early trading [9] Strategic Developments - Synchrony is focusing on digital enhancements, reporting an 18% increase in total digital visits and a 17% rise in sales, attributed to improvements in its marketplace, website, and mobile app [9] - Investments in AI search, mobile wallet integration, and platform connectivity are seen as key drivers for increasing consumer engagement [10] - The partnership with Walmart is highlighted as a significant growth contributor, with the retailer being described as Synchrony's fastest-growing program [10][11] Regulatory Concerns - Management expressed strong opposition to proposed 10% APR caps, arguing that such measures would reduce credit availability, particularly impacting lower-income consumers [12] - The company supports around 400,000 small and mid-sized businesses, warning that credit caps could disrupt merchant economics and consumer access to credit [12][13] - Synchrony anticipates mid-single-digit receivables growth in 2026, supported by the maturation of new programs and improved core volumes [13]

Financial Data and Key Metrics Changes - Synchrony reported net earnings of $751 million, or $2.04 per diluted share, including a 14-cent restructuring charge related to a voluntary employee early retirement program, with a return on average assets of 2.5% and a return on tangible common equity of 21.8% [4][18] - For the full year, net earnings reached $3.6 billion, or $9.28 per diluted share, with a return on average assets of 3.0% and a return on tangible common equity of 25.8% [19] - The efficiency ratio for the fourth quarter was 36.9%, approximately 360 basis points higher than the previous year, primarily due to higher overall expenses and the impact of higher RSAs on net revenue [23] Business Line Data and Key Metrics Changes - Purchase volume reached $49 billion in the fourth quarter, a record and a 3% year-over-year increase, with digital platform purchase volume increasing by 6% [4][19] - Dual and co-branded cards accounted for 50% of total purchase volume, increasing by 16% year-over-year, driven by product upgrades and higher spend [6] - Purchase volume in health and wellness grew by 4%, while home and auto purchase volume decreased by 2% [5][6] Market Data and Key Metrics Changes - The company added or renewed over 25 partners in the fourth quarter, including significant partnerships with Bob's Discount Furniture and Polaris, enhancing its market presence [8][9] - Synchrony now partners with over 50 merchant and practice management platforms, expanding its reach in health and wellness and home and auto markets [11] Company Strategy and Development Direction - Synchrony is focused on diversifying its programs, products, and markets while enhancing customer experiences through strategic partnerships and technological investments [10][16] - The company aims to grow its portfolio in a prudent, risk-adjusted manner, with expectations of mid-single-digit ending receivables growth in 2026 [29][30] - Investments in AI, cloud technology, and health and wellness are prioritized to drive productivity and growth [77] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about consumer resilience and spending patterns, indicating a constructive macro environment [41] - The company anticipates that net charge-off rates will align with long-term targets of 5.5%-6% and expects continued growth in net interest income [30][31] - Management highlighted the importance of maintaining competitive pricing and availability of credit for consumers, especially in light of potential regulatory changes [48][49] Other Important Information - Synchrony returned $1.1 billion to shareholders in the fourth quarter, consisting of $952 million in share repurchases and $106 million in dividends [27] - The company reported a decrease in total liquid assets by 3% to $16.6 billion, representing 13.9% of total assets [26] Q&A Session Summary Question: Can you discuss the mid-single digit growth guide for receivables growth? - Management noted that consumer spending has been resilient, with co-brand purchase volume growing significantly, particularly due to the Walmart partnership [40][42] Question: What are your views on the 10% APR caps? - Management expressed concerns that such caps would limit credit availability for lower-income consumers and negatively impact merchants reliant on credit programs [48][49] Question: Can you unpack the credit guide and expected losses? - Management indicated that while there is a strong foundation entering 2026, new portfolios like Walmart may introduce upward bias in losses [60][61] Question: What net interest margin is embedded within the guidance? - Management expects net interest income and margin to increase, driven by PPPCs and lower funding costs, but acknowledges potential headwinds from changing interest rates [62][64] Question: How are PPPCs tracking relative to expectations? - Management reported that PPPCs are slightly ahead of expectations, with continued benefits anticipated from APR changes [71][73] Question: What investments are being made for growth? - Significant investments are being made in reserves, marketing, and technology, particularly in AI and cloud initiatives, to support growth [75][77]

Financial Data and Key Metrics Changes - Synchrony reported net earnings of $751 million, or $2.04 per diluted share, including a restructuring charge of $0.14 related to a voluntary employee early retirement program [4][18] - The return on average assets was 2.5%, and the return on tangible common equity was 21.8% for the fourth quarter [4][18] - For the full year, net earnings reached $3.6 billion, or $9.28 per diluted share, with a return on average assets of 3.0% and a return on tangible common equity of 25.8% [19] Business Line Data and Key Metrics Changes - Purchase volume across the Digital platform increased by 6%, while Diversified and Value purchase volume grew by 4% due to partner expansion [4][5] - Health & Wellness purchase volume also grew by 4%, driven by pet and audiology sectors, while Lifestyle platform purchase volume increased by 3% [5][6] - Home & Auto purchase volume decreased by 2%, reflecting selective spending in home improvement [6] Market Data and Key Metrics Changes - Synchrony added over 20 million new accounts and engaged nearly 70 million existing customers, generating over $182 billion in sales for partners in 2025 [8] - The company added or renewed more than 25 partners in the fourth quarter, including significant partnerships with Bob's Discount Furniture and Polaris [8][9] - Approximately 97% of total interest and fees from top 25 partners are renewed through 2028, indicating strong partner trust [9] Company Strategy and Development Direction - Synchrony aims to enhance the value and utility of financing solutions, broaden reach, and deliver powerful experiences for customers and partners [7][10] - The company is diversifying programs and products, entering partnerships with over 50 merchant and practice management platforms [10][11] - Investments in AI and cloud technology are expected to drive productivity and growth [77] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in consumer resilience and spending patterns, indicating a constructive macro environment [41] - The company anticipates mid-single-digit growth in ending receivables for 2026, driven by active accounts and purchase volume growth [29] - The net charge-off rate is expected to align with the long-term target of 5.5%-6% [30] Other Important Information - Synchrony returned $1.1 billion to shareholders in the fourth quarter, including $952 million in share repurchases [27] - The company’s efficiency ratio for the fourth quarter was 36.9%, impacted by higher expenses and restructuring charges [23] - The allowance for credit losses as a percentage of loan receivables was 10.06%, reflecting a decrease from previous quarters [25] Q&A Session Summary Question: Growth guide for receivables - Management noted that the mid-single-digit growth guide is supported by strong consumer spending and the successful launch of the Walmart program, which is the fastest-growing program [40][42] Question: Impact of 10% APR caps - Management expressed concerns that APR caps would limit credit availability for lower-income consumers and negatively impact merchants relying on credit programs [48][49] Question: Credit guide and losses - Management indicated that while losses may increase slightly, strong delinquency performance provides a solid foundation entering 2026 [58][59] Question: Net interest margin guidance - Management expects net interest income and margin to improve, driven by PPPCs and lower funding costs, but acknowledges potential headwinds from the interest rate environment [62][64] Question: PPPC tracking and future expectations - Management reported that PPPCs are performing slightly ahead of expectations, with continued benefits anticipated [71][73] Question: Investments related to growth - Management highlighted significant investments in reserves, marketing, and technology, particularly in AI and cloud initiatives, to support growth [75][77]

Financial Data and Key Metrics Changes - The company reported net earnings of $751 million, or $2.04 per diluted share, which included a restructuring charge of $0.14 related to a voluntary employee early retirement program [5][19] - The return on average assets was 2.5%, and the return on tangible common equity was 21.8% [5][19] - For the full year, net earnings reached $3.6 billion, or $9.28 per diluted share, with a return on average assets of 3.0% and a return on tangible common equity of 25.8% [20] Business Line Data and Key Metrics Changes - Purchase volume reached $49 billion in Q4, a record for the quarter, reflecting a 3% year-over-year increase [5][20] - Digital platform purchase volume increased by 6%, driven by higher spend per account [5] - Purchase volume in health and wellness grew by 4%, while lifestyle platform purchase volume increased by 3% [6] - Dual and co-branded cards accounted for 50% of total purchase volume, increasing by 16% year-over-year [6] Market Data and Key Metrics Changes - The company added or renewed over 25 partners in Q4, including significant partnerships with Bob's Discount Furniture and Polaris [9][10] - The company now partners with over 50 merchant and practice management platforms, enhancing access to financing solutions [12] Company Strategy and Development Direction - The company aims to enhance the value and utility of its financing solutions, broaden its reach, and deliver powerful experiences for customers and partners [8] - Investments in AI and cloud technology are prioritized to drive productivity and growth [76] - The company is focused on diversifying its programs and products while maintaining strong relationships with partners [11][88] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the consumer's resilience and spending patterns, indicating a constructive macro environment [40] - The company expects mid-single-digit growth in ending receivables for 2026, driven by new partnerships and improved consumer confidence [30][31] - The net charge-off rate is anticipated to align with the long-term target of 5.5%-6% [31] Other Important Information - The efficiency ratio for Q4 was 36.9%, impacted by higher overall expenses and restructuring charges [25] - The company returned $1.1 billion to shareholders in Q4, including $952 million in share repurchases [29] Q&A Session Summary Question: Can you discuss the mid-single digit growth guide for receivables growth? - Management noted that consumer spending has been resilient, with purchase volume showing a positive trajectory and co-brand volume growth accelerating, particularly with Walmart [40][41] Question: What are your views on the 10% APR caps? - Management expressed concerns that APR caps would limit credit availability for lower-income consumers and negatively impact merchants who rely on credit programs [48][49] Question: Can you unpack the credit guide and expected losses? - Management indicated that while there is a strong foundation entering 2026, new portfolios like Walmart may introduce early losses, impacting the overall credit guide [59] Question: What net interest margin is embedded within the guidance? - Management expects net interest income to increase, with a bias for margin improvement, despite potential headwinds from the interest rate environment [61][62] Question: How are the PPPCs tracking relative to expectations? - Management reported that PPPCs are slightly ahead of expectations, with benefits from elevated payment rates [71][72] Question: What investments are being made for growth? - Significant investments are being made in reserves for asset growth, marketing, and technology, particularly in AI and cloud initiatives [76][78]

Synchrony (SYF) came out with quarterly earnings of $2.18 per share, beating the Zacks Consensus Estimate of $2.02 per share. This compares to earnings of $1.91 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of +8.08%. A quarter ago, it was expected that this consumer credit company would post earnings of $2.22 per share when it actually produced earnings of $2.86, delivering a surprise of +28.83%.Over the last four quarters, th ...

Financial Performance - Net earnings available to common stockholders decreased by 3% to $730 million in 4Q'25 compared to $753 million in 4Q'24[15] - Diluted earnings per share increased by 7% to $2.04 in 4Q'25 from $1.91 in 4Q'24, which includes ~$0.14 restructuring charge[13, 15] - Net revenue remained flat year-over-year at $3.793 billion in 4Q'25[15, 16] - Net interest margin increased by 82 bps to 15.83% in 4Q'25 compared to 15.01% in 4Q'24[13, 16] Portfolio and Credit Trends - Loan receivables decreased by 1% year-over-year[13] - Purchase volume increased by 3% year-over-year[13] - Net charge-offs decreased to 5.37% in 4Q'25 from 6.45% in 4Q'24[13] Expenses - Other expense increased by 10% to $1.399 billion in 4Q'25 from $1.267 billion in 4Q'24, driven by employee costs and technology investments[15, 21] - Efficiency ratio increased to 36.9% in 4Q'25 from 33.3% in 4Q'24, including an approximate 180bps impact related to restructuring costs[13, 21] Capital and Funding - Common Equity Tier 1 (CET1) capital ratio was 12.6% in 4Q'25[13, 27] - Liquid assets totaled $16.6 billion, representing 13.9% of total assets[26] 2026 Outlook - The company projects mid-single digit ending loan receivables growth[29] - The company anticipates a net charge-off rate of approximately 5.5% to 6.0%[29] - The company forecasts earnings per diluted share to be in the range of $9.10 to $9.50[29]

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Financial Performance - Net interest income for Q4 2025 was $4,761 million, an increase of 3.7% compared to Q4 2024[1] - Net revenue decreased by 0.2% year-over-year to $3,793 million in Q4 2025[1] - Provision for credit losses decreased by 7.6% to $1,442 million in Q4 2025 compared to Q4 2024[1] - Net earnings for Q4 2025 were $751 million, down 3.0% from $1,077 million in Q4 2024[1] - Basic EPS for Q4 2025 was $2.07, a decrease of 7.3% from $2.89 in Q4 2024[1] - Dividend declared per share increased by 20.0% to $0.30 in Q4 2025 compared to Q4 2024[1] - Common stock price rose by 28.4% to $83.43 at the end of Q4 2025 compared to $65.00 at the end of Q4 2024[1] - Book value per share increased by 13.1% to $44.74 in Q4 2025 from $39.55 in Q4 2024[1] - Shares repurchased in Q4 2025 totaled 13.0 million, a significant increase compared to previous quarters[1] Asset and Liability Management - Total assets decreased by $368 million, or 0.3%, to $119,095 million compared to the previous quarter[7] - Total liabilities decreased by $554 million, or 0.5%, to $102,329 million compared to the previous quarter[7] - Total equity increased by $186 million, or 1.1%, to $16,766 million compared to the previous quarter[7] - Total deposits decreased by $918 million, or 1.1%, to $81,144 million compared to the previous quarter[7] - Goodwill increased by $89 million, or 7.0%, to $1,363 million compared to the previous quarter[7] - Intangible assets increased by $401 million, or 47.0%, to $1,255 million compared to the previous quarter[7] Credit Quality - Return on assets for Q4 2025 was 2.5%, down from 3.0% in Q4 2024, reflecting a decrease of 0.5%[2] - Return on equity decreased to 17.6% in Q4 2025 from 21.1% in Q4 2024, a decline of 3.5%[2] - Net charge-offs for Q4 2025 were $1,367 million, a decrease of 11.8% from $1,588 million in Q4 2024[2] - Allowance for credit losses at period-end was $10,442 million, down 4.5% from $10,929 million in Q4 2024[2] Interest Income and Expense - Total interest income for Q4 2025 was $5,734 million, a slight increase of 0.4% compared to Q4 2024[6] - Interest expense for Q4 2025 was $973 million, a decrease of 13.0% from $1,011 million in Q4 2024[6] - Net interest income after retailer share arrangements and provision for credit losses was $2,225 million, reflecting a 5.4% increase from Q4 2024[6] Segment Performance - Home & Auto segment purchase volume decreased by 1.6% year-over-year to $10,381 million for the quarter ended December 31, 2025, and by 4.9% to $42,347 million for the twelve months ended December 31, 2025[17] - Digital segment purchase volume increased by 5.8% to $16,206 million for the quarter ended December 31, 2025, and by 3.1% to $56,376 million for the twelve months ended December 31, 2025[17] - Total purchase volume for Synchrony Financial increased by 3.2% to $49,476 million for the quarter ended December 31, 2025, and by 0.1% to $182,285 million for the twelve months ended December 31, 2025[17] Capital Ratios and Equity - Total common equity as of December 31, 2025, is $15,544 million, reflecting a 1.2% increase from $15,358 million on December 31, 2024[13] - Tangible common equity decreased to $12,926 million as of December 31, 2025, down 2.3% from $13,230 million a year earlier[13] - Total risk-based capital ratio stands at 15.8% as of December 31, 2025, a decrease from 16.5% on December 31, 2024[13] - Tier 1 risk-based capital ratio is 13.8% as of December 31, 2025, down from 14.5% a year prior[13] Transition to CECL - The company is in the process of transitioning to the CECL framework, with capital ratios reflecting 100% of the phase-in effects for 2025[15] - Regulatory capital ratios are preliminary and subject to change, indicating ongoing adjustments in financial reporting[14]

Core Insights - Synchrony Financial announced its fourth quarter 2025 results for the fiscal year ending December 31, 2025 [1] - The company declared a quarterly cash dividend of $0.30 per share of common stock, payable on February 17, 2026 [3] - The Board also declared dividends on its preferred stock, approximately $14.06 per share for Series A and $20.63 per share for Series B, both payable on February 17, 2026 [3] Financial Performance - The earnings news release and presentation are available on the company's Investor Relations website [1] - A conference call to review financial results and outlook will be hosted by the CEO and CFO [2] Company Overview - Synchrony is a leading consumer financing company, providing credit and banking products to improve financial lives [4] - The company supports the growth of respected brands and small to midsize businesses, including health and wellness providers [4] - Synchrony has been recognized as the 2 Best Company to Work For in the U.S. by Fortune magazine and Great Place to Work [4]