Please ensure Javascript is enabled for purposes of website accessibility

Why Synchrony Financial Stock Plummeted Today

By Rich Smith - Apr 28, 2017 at 12:35PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A big earnings miss tanked the private-label credit card provider's stock.

What happened

Shares of Synchrony Financial (SYF 0.08%) have dropped today, down 15.9% as of 11:45 a.m. EDT, after the company reported first-quarter earnings.

So what

Expected to report $0.73 per share in profit on $3.6 billion in Q1 sales, Synchrony instead reported only $0.61 per share earned -- despite raking in more than $3.99 billion in revenue.

This was a big miss for Synchrony, and it kind of shocked Wall Street -- the more so because Synchrony's profits actually declined year over year, whereas Wall Street had expected the banker to eke out a small gain. One year ago, Synchrony had earned $0.70 per share in Q1 2016 profits.

Explaining its loss, Synchrony noted that while its interest income increased a respectable 12% in Q1, the bank was forced to take a $403 million provision against anticipated higher loan losses. This wiped out the gains in interest, and reduced profit for the bank as a whole.

Credit cards fanned out

Image source: Getty Images.

Now what

Priced today at barely 10 times earnings, Synchrony shares look fairly valued relative to analysts' consensus prediction of an eventual return to 9%-plus annual earnings growth, especially factoring in the bank's just-confirmed 1.6% dividend yield. While I wouldn't go so far as to call the stock cheap, it does look reasonably priced today, and if future quarters see lower levels of loan loss reserves taken, a rebound in earnings could make the stock attractive again.

Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Synchrony Financial. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Synchrony Financial Stock Quote
Synchrony Financial
SYF
$36.14 (0.08%) $0.03

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/15/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.