Analyst Note| Michael Miller |
Synchrony reported a decent quarter, with earnings of $1.73 per diluted share beating the FactSet consensus of $1.37. The EPS beat was driven by strong credit results, which saw the company’s net charge-offs fall to 3.62% of total average loan receivables compared with 5.36% in the prior year's quarter. As unemployment continues to fall and credit losses remain low, it appears that fiscal stimulus programs have forestalled any major credit consequences from the pandemic. We do expect credit costs to normalize in the second half of the year, but we are raising our fair value estimate for Synchrony to $35 from $32 as we lower our expectations for charge-offs as the United States enters the second half of the COVID-19 vaccine rollout with credit conditions intact.