On Tuesday, Goldman Sachs (NYSE:GS) maintained a Buy rating on Synchrony Financial (NYSE:SYF) shares with a price target of $72.50. The stock, currently trading near its 52-week high of $69.39, has delivered impressive returns with a 96.8% gain over the past year. According to InvestingPro analysis, the company maintains a "GREAT" financial health score, supported by strong momentum and profitability metrics.
The firm's analysis highlighted Synchrony's recent performance, noting the company reported metrics for November that demonstrated better-than-expected delinquency rates, while net charge-offs (NCOs) were slightly below the seasonal trend on a cycle-adjusted basis.
With a market capitalization of $26.44 billion and a P/E ratio of 8.8, Synchrony's loan growth was mentioned as slightly lower than typical seasonal patterns but was in line with the company's guidance. For deeper insights into Synchrony's financial metrics and performance indicators, InvestingPro subscribers have access to over 30 additional key metrics and analysis tools.
Delinquencies remained stable month-over-month at 4.90%, which is an outperformance compared to the expected seasonal increase. This figure is a 20 basis point increase year-over-year, showing a slower rise in delinquencies than the previous month.
In contrast, NCOs were reported at 6.20%, a 20 basis point decrease from the previous month, defying the usual seasonal rise. However, on a cycle-adjusted basis, NCOs per cycle day increased slightly to 23.85 basis points.
The report also pointed out that the number of days in the upcoming month will affect reported NCOs, with an expectation for an increase in December due to there being more days compared to November 2024. Quarter to date, average losses are at 6.30%, and considering December's seasonality and the higher number of cycle-adjusted days, fourth-quarter losses are estimated to track at 6.38%, aligning with the consensus.
Loan growth was slightly below the seasonal trend, with end-of-period (EOP) loans showing a 0.6% month-over-month increase to $102.9 billion, which is a 1.7% increase year-over-year. This is less than the seasonal expectation of a 1.1% monthly increase.
Average loans saw a marginal 0.1% month-over-month increase, underperforming the seasonal trend by 0.5%, but experienced a 2.7% rise year-over-year, which is considered to be in line with Synchrony's guidance for low single-digit loan growth.
Goldman Sachs concluded that while adjusted NCOs were slightly worse than seasonal trends, the better-than-expected delinquency rates are indicative of the impact of continued credit tightening. The firm anticipates the market will likely focus on the strong delinquency performance.
Notably, InvestingPro data shows the company has maintained dividend payments for 9 consecutive years, with a current dividend yield of 1.47%. Based on InvestingPro's Fair Value analysis, the stock appears slightly overvalued at current levels, though it continues to demonstrate strong momentum with an 81.86% gain year-to-date.
In other recent news, Synchrony Financial has declared robust third-quarter earnings with net earnings of $789 million, surpassing consensus estimates. Consequently, the company has revised its full-year 2024 earnings per share (EPS) guidance upwards to a range of $8.45-$8.55. Synchrony Financial has also declared a quarterly cash dividend for its common and preferred stockholders, signaling a stable financial position.
Analyst firms such as Baird, RBC (TSX:RY) Capital, Wells Fargo (NYSE:WFC), and JPMorgan (NYSE:JPM) have upgraded their price targets for Synchrony Financial following these recent developments. In particular, JPMorgan upgraded Synchrony Financial's stock from Neutral to Overweight, citing the company's proactive steps to counter potential revenue losses due to the Consumer Financial Protection Bureau's (CFPB) late fee rule.
In addition to these financial results, Synchrony Financial has been transparent about its financial health, releasing its monthly charge-off and delinquency statistics. These metrics provide valuable insights to investors and analysts into the health of the company's credit portfolio.
Despite these positive developments, Synchrony Financial anticipates a low single-digit decline in purchase volume for Q4, reflecting ongoing challenges in consumer spending and credit performance.
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