On Monday, Goldman Sachs (NYSE:GS) reaffirmed its Buy rating and $51.00 price target for Synchrony Financial (NYSE:SYF). Synchrony Financial has exhibited monthly performance metrics that align with or surpass expectations.
Delinquency rates showed a month-over-month improvement, dropping 10 basis points to 4.5%, which is slightly better than the historical monthly average decrease of 8 basis points. Net charge-offs (NCOs) also outperformed historical trends, with a month-over-month reduction of 30 basis points, resulting in a year-over-year increase of 150 basis points to 6.40%.
The company's loan growth was reported to be consistent with projections, displaying a modest increase. End-of-period (EOP) loans rose by 0.8% month-over-month to $102.4 billion, marking a 9.1% increase year-over-year. This growth is in line with the average seasonal monthly increase of 0.5%. Average loans also saw a month-over-month uptick of 0.3% and a significant 9.9% rise year-over-year, which is consistent with seasonal expectations.
Looking at the quarter-to-date figures, the trend in EOP loans suggests an expected second-quarter ending balance of $102.6 billion. This figure is slightly below the Visible Alpha Consensus Data estimate of $104.0 billion.
For NCOs, incorporating the anticipated June seasonality of a 30 basis points decrease month-over-month, Goldman Sachs projects the second-quarter NCO rate for Synchrony Financial to be around 6.4%, which is relatively in line with or slightly better than the street estimates of 6.43%.
Goldman Sachs interprets these results as aligning with the anticipation that April might represent the peak in NCOs for the year and supports Synchrony Financial's position that credit levels are beginning to stabilize.
Year-to-date, NCOs have averaged approximately 6.4%, compared to the full-year 2024 consensus estimates of 6.09%. To meet these expectations, Synchrony Financial would need to maintain an average NCO rate of about 5.85% to 5.9% for the remainder of the year.
In other recent news, Synchrony Financial has been gaining attention due to its robust first-quarter results, strategic acquisitions, and regulatory adaptations. The company's net earnings rose significantly due to the sale of its Pets Best insurance business and the acquisition of Ally Lending's point-of-sale financing portfolio. These developments have allowed Synchrony Financial to expand its customer base and strengthen partnerships while maintaining a solid financial position.
Analysts from BTIG, Keefe, Bruyette & Woods, BMO Capital, and RBC Capital have adjusted their outlook on the company, reflecting these recent developments. BTIG started coverage of Synchrony Financial with a Buy rating, highlighting the company's recent successes and the favorable macro environment as catalysts for continued growth. Keefe, Bruyette & Woods upgraded Synchrony Financial's rating to Outperform, citing reduced regulatory risks and favorable legal outcomes.
Both BMO Capital and RBC Capital increased their stock price targets for the company, following stronger than expected first-quarter earnings and successful mitigation strategies against late fee regulations. Despite challenges such as higher delinquency and net charge-off rates, Synchrony Financial has shown resilience and adaptability.
InvestingPro Insights
Synchrony Financial (NYSE:SYF) has been the subject of positive reaffirmation from Goldman Sachs, and the latest data from InvestingPro reinforces the company's strong standing in the financial sector. With a market capitalization of $17.62 billion, SYF's attractive P/E ratio of 6.3, which further adjusts to an even more appealing 5.62 for the last twelve months as of Q1 2024, highlights its value proposition. The company's PEG ratio during the same period stands at 0.28, indicating potential for growth relative to its earnings.
InvestingPro Tips suggest strategic moves by management, such as aggressive share buybacks, and a record of maintaining dividend payments for 9 consecutive years, with a dividend yield of 2.29% as of mid-2024. These factors, combined with a robust 25.33% price uptick over the last six months, could be signaling confidence in SYF's financial health and future prospects. Additionally, analysts predict profitability for the company this year, a trend supported by its recent performance metrics.
For readers interested in a deeper analysis, InvestingPro offers a comprehensive set of additional tips for SYF. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking valuable insights that could inform investment decisions. With the next earnings date slated for July 16, 2024, investors may want to keep a close eye on SYF's performance metrics and market position.
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