Why Is Synchrony (SYF) Up 9.4% Since Last Earnings Report?

A month has gone by since the last earnings report for Synchrony (SYF). Shares have added about 9.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Synchrony due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Synchrony Beats Q2 Earnings Estimates, Raises 2026 EPS Outlook

Synchrony reported second-quarter 2026 adjusted earnings per share (EPS) of $2.59, which surpassed the Zacks Consensus Estimate by 24.5%. The bottom line increased 3.6% year over year.

Net interest income increased 1.9% year over year to $4.6 billion but missed the consensus estimate by 1.1%. The growth was driven by lower interest-bearing liability costs, partly offset by lower loan and liquidity portfolio yields.

The quarterly results were driven by record purchase volume, accelerated growth in ending loan receivables despite elevated payment behavior, continued credit strength and an expansion in net interest margin. However, higher operating expenses and an increase in the provision for credit losses partly offset these positives.

Synchrony’s Q2 Results in Detail

Retailer share arrangements of Synchrony advanced 3.5% year over year to $1 billion in the second quarter. Total loan receivables were $102.2 billion, up 2.4% year over year. The figure beat the Zacks Consensus Estimate of $101.9 billion as well as our estimate of $101.8 billion.

Total deposits increased 0.7% year over year to $82.8 billion but missed our estimate of $83.5 billion. Provision for credit losses increased 4.8% year over year to $1.2 billion, primarily due to a smaller reserve release than in the prior-year period, partially offset by lower net charge-offs. However, the reported figure came in below our estimate of $1.5 billion.

Synchrony’s purchase volume rose 8.1% year over year to $49.8 billion on higher spend per account. The figure beat the consensus estimate of $48.7 billion and our estimate of $47.7 billion.

Interest and fees on loans increased 1% year over year to $5.4 billion but marginally missed our estimate of $5.5 billion. The increase was driven by higher loan receivables yields, partly offset by lower benchmark rates. Net interest margin expanded 30 basis points year over year to 15.08% but fell short of the Zacks Consensus Estimate of 15.25%.

Average active accounts increased 0.4% year over year at 68.3 million, missing the Zacks Consensus Estimate of 68.9 million and our estimate of 68.7 million.

Total other expenses increased 6.9% year over year to $1.33 billion, slightly above our estimate of $1.30 billion. The efficiency ratio rose 170 basis points year over year to 35.8%, which outpaced the Zacks Consensus Estimate of 35.05%.

Movement in Individual Sales Platforms

Home & Auto period-end loan receivables decreased 0.1% year over year in the second quarter. Purchase volume rose 5.8% year over year, reflecting the performance of new programs. Interest and fees on loans declined 0.1% year over year.

Digital period-end loan receivables inched up 4.4% year over year. Purchase volume increased 9.2%, driven by strong performance across diversified partners. Interest and fees on loans rose 1.8% year over year.

Diversified & Value period-end loan receivables increased 6.5% year over year. Purchase volume increased 11.7%, driven by partner expansion and higher gas sales. Interest and fees on loans increased 1.6% year over year.

Health & Wellness period-end loan receivables inched up 0.5% year over year. Purchase volume increased 2.1% year over year, supported by growth in Pet, partly offset by lower Cosmetic spending. Interest and fees on loans advanced 2.7% year over year.

Lifestyle period-end loan receivables decreased 0.9% year over year in the second quarter. Purchase volume rose 6%, reflecting new program growth and higher spending in Other Apparel and Goods and Luxury. Interest and fees on loans declined 1.9% year over year.

Synchrony’s Financial Position (As of June 30, 2026)

Synchrony exited the second quarter with cash and equivalents of $16.2 billion, which increased from the 2025-end level of $15 billion. Total assets of $121.9 billion increased from the 2025-end figure of $119.1 billion. SYF’s balance sheet was consistently strong in the reported quarter, with total liquidity of $19.8 billion accounting for 16.2% of its total assets.

Total borrowings were $16.4 billion, up from $15.2 billion as of Dec. 31, 2025. Total equity of $16.9 billion inched up from the 2025-end figure of $16.8 billion.

Return on assets decreased 30 basis points to 2.9%. Return on equity was 21.4%, which decreased 170 bps year over year.

Capital Deployment Update

Synchrony returned $950 million to shareholders, including $850 million through share buybacks and $100 million in dividends. As of June 30, 2026, the company had a total remaining repurchase authorization of $5.7 billion, with no expiration date.

SYF’s 2026 Guidance

Synchrony continues to anticipate mid-single-digit growth in period-end loan receivables. Strong purchase volume growth is expected to continue throughout 2026. The payment rate is expected to remain high. SYF expects receivables growth to accelerate in the second half of 2026.

The company narrowed its 2026 earnings per share guidance to $9.25-$9.50 from $9.10-$9.50, raising the lower end of the range.

RSA, as a percentage of average loan receivables, is increasing, reflecting strong program performance, and is expected to remain within the 4-4.5% target range.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -6.95% due to these changes.

VGM Scores

At this time, Synchrony has a subpar Growth Score of D, a score with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for value investors.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Synchrony has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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This article originally published on Zacks Investment Research (zacks.com).

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