On Thursday, Baird increased the stock price target for Synchrony Financial (NYSE:SYF) to $62 from $60, while maintaining an Outperform rating on the stock. This adjustment follows Synchrony Financial's reported earnings per share (EPS) of $1.94, surpassing the consensus estimate of $1.74.
The company's performance was attributed to a robust core pre-provision net revenue (PPNR), which exceeded expectations due to the full-quarter revenue impact from the proactive payment protection controls (PPPCs).
The PPPCs were implemented as a proactive response to the proposed changes in late fee regulations. The analyst noted the company's solid credit performance, with year-over-year delinquency (DQ) growth continuing to decline. Net charge-offs (NCOs) were reported at approximately 6.06%, which is slightly above the management's target range of 5.5% to 6%.
The revised fiscal year 2024 guidance suggests a 5% to 7% upside in EPS compared to the consensus, as it now assumes that the implementation of late fees will not take place in FY2024. Baird's models indicate that this might occur in the first quarter of 2025. The analyst's commentary highlighted the company's higher EPS outlook and net interest margin (NIM) expansion as key drivers of the stock's current outperformance.
Investors are encouraged by the firm's perspective, which remains positive on Synchrony Financial's shares, suggesting that buying on weakness could be a favorable strategy. The updated guidance and strong quarterly results have reinforced the analyst's confidence in the company's financial trajectory.
In other recent news, Synchrony Financial reported robust third-quarter earnings, with net earnings of $789 million or $1.94 per diluted share. The company revised its full-year 2024 earnings per share (EPS) guidance upwards to a range of $8.45-$8.55, surpassing estimates from both JPMorgan and consensus.
Despite challenges in consumer spending and credit performance, Synchrony managed to add 4.7 million new accounts and generate $45 billion in purchase volume. The company anticipates a low single-digit decline in purchase volume for Q4 and expects a fully diluted EPS between $8.45 and $8.55 for the full year 2024.
RBC Capital, Wells Fargo, and JPMorgan have all recently upgraded their price targets for Synchrony Financial. RBC Capital raised its target to $62 from $55, Wells Fargo to $60 from $53, and JPMorgan to $59 from $53, all maintaining neutral ratings on the stock. These upgrades follow the company's strong earnings report and reflect confidence in Synchrony's ability to manage potential regulatory changes and maintain stable performance.
Synchrony Financial is also navigating uncertainties related to the Consumer Financial Protection Bureau's late fee rule litigation. Both Wells Fargo and JPMorgan analysts noted a positive near-term outlook for the company, citing a delay in the rule's implementation due to ongoing court proceedings.
Despite these uncertainties, Synchrony remains focused on long-term risk-adjusted returns and plans to adapt strategies based on portfolio performance and market conditions.
InvestingPro Insights
Synchrony Financial's recent performance aligns with several key metrics and insights from InvestingPro. The company's P/E ratio of 7.9 and adjusted P/E ratio of 6.97 for the last twelve months as of Q2 2024 suggest that the stock is trading at a relatively low valuation compared to its earnings. This is further supported by an InvestingPro Tip indicating that SYF is "Trading at a low P/E ratio relative to near-term earnings growth."
The company's strong financial position is reflected in its revenue growth of 14.02% over the last twelve months and an impressive operating income margin of 48.48%. These figures underscore the robust core pre-provision net revenue mentioned in the article.
Moreover, Synchrony's dividend yield of 1.77% and a 8.7% dividend growth rate over the last twelve months demonstrate the company's commitment to shareholder returns, which is consistent with another InvestingPro Tip noting that SYF "Has maintained dividend payments for 9 consecutive years."
The market's positive reaction to Synchrony's performance is evident in the stock's recent price movements. With a 14.9% price total return over the past month and a substantial 90.28% return over the last year, SYF is currently trading near its 52-week high, as indicated by both the data and an InvestingPro Tip. This aligns with Baird's increased price target and outperform rating.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for Synchrony Financial, providing a deeper understanding of the company's financial health and market position.
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