consumer financial services company Synchrony Financial (NYSE:SYF) stock was in tears after a strong beating in the first quarter of fiscal 2022 results. The company provides consumer lending solutions ranging from credit cards and financing options in many segments, including veterinary care, sports motor vehicles, equipment, auto repair, home improvement and medical care. The company added 5.5 million accounts in its latest quarter to reach a total of 70.1 active accounts, up 6% from the previous year. The company added or renewed more than 15 programs with well-known brands, including Mattress Warehouse, Guitar Center, NAPA Auto Care and Generac Power Solutions. It is the private label cards that receive higher interest rates than while mitigating some of the risk of default by dual brand credit cards. Default rates have been in line with banks, but lead the industry with net margin interest at 15.80%, compared to less than 2.5% for US banks. The US Federal Reserve has telegraphed an aggressive rate hike strategy to fight inflation that will further bolster Synchrony’s earnings. The shares are trading at just 7 times forward earnings. The Company approved a $2.08 billion share buyback program beginning in the third quarter of fiscal 2022 and a 5% dividend increase. Cautious investors looking for a strong financial trade can look for opportunistic pullback levels in Synchrony Financial stock.
Publication of results for the first quarter of fiscal year 2022
On April 18, 2022, Synchrony Financial released its fiscal first quarter 2022 results for the quarter ending March 2022. The company reported earnings per share (EPS) of $1.77 versus $1.54 estimated by consensus analysts, a beat of $0.23. Revenue rose 8.21% to $2.79 billion, beating estimates of $149.8 million. Interest and fees on loans increased 7% year-over-year (YoY) to $4 billion, driven by growth in average receivables on total loans of $83 billion. Purchase volume increased 17% to $40.5 billion. Average active account increased 5% to 70.1 million. The net interest margin increased by 182 basis points to 15.80% and the efficiency ratio increased by 110 basis points to 37.2%. The company expanded the CareCredit network with a multi-year agreement with Mercyhealth to provide patient financing options.
Takeaways from the conference call
Synchrony Financial CEO Brian Doubles set the tone by highlighting first quarter 2022 achievements, including net income of $932 million, a 4% return on average assets and a return on tangible equity of 34.9%. In addition to the 10% growth in the number of new accounts and the 6% growth in the average number of active accounts, he pointed out that the purchase volume increased by 17% year-on-year. Higher engagement was seen, with purchase volume increasing by 10% per account year-over-year. He broke down the spending demographics of his customers, with Millennials and Gen Z increasing their spending by 23% annually, while Gen Xers and older Baby Boomers increased their spending by 15% annually. Its co-branded credit cards accounted for 42% of purchase volume in the first quarter of fiscal 2022, up 29% year-on-year. The Double CEO highlighted its partnership with PayPal as an example of improving its offerings: “Earlier this month, we announced the launch of our new PayPal Cashback co-branded credit card. The consumer value proposition is a premium cashback offer where the consumer will earn an unlimited cashback of 3% when paying with PayPal at checkout and 2% everywhere else Mastercard is accepted. The card has no annual fee, no category restrictions and can be added to the digital wallet for easy, fast and secure payment. It will be integrated into the PayPal application.
SYF Opportunistic Withdrawal Levels
Using rifle charts on the weekly and daily timeframes provides an accurate view of the price action playing field for SYF stocks. The downtrend on the Rifles weekly chart bottomed near $33.85 Fibonacci level (fib) and staged a rally to peak at the $41.88 level. The weekly downtrend has stalled as the 5-period moving average (MA) rises to $37.19. The 15-period MA falls to $37.19. The weekly 200-period MA support stands at $34.61 and the 50-period MA resistance stands at $45.88. The weekly weak market structure (MSL) buying triggered a break above $38.39. The weekly stochastic attempts a 20-band rebound as it breaks above the 15-period MA on channel tightening. The daily Rifle chart has been bullish but could hit a shooting star peak as the Stochastic reverses from the 90 band. The daily 5-period MA tests at $39.74 followed by support the 50-period MA at $38.62 and the 15-period MA up at $37.23. The daily Stochastic peaked and broke through the 90 band, creating a reversal. Prudent investors can watch for opportunistic pullbacks at the $37.84 fib, $36.34 fib, $34.84 fib, $33.85 fib, $32.71 fib, of $31.64, the fib of $29.99 and the fib of $27.50. The upward trajectories range from the $50.56 fib to the $64.55 fib level.