Financial Performance

Synchrony Shares Jump on Big Earnings Beat

The company's acquisition of PayPal's U.S. consumer credit portfolio helped boost loan receivables by $11 billion, or 14%.
Matthew HellerJanuary 23, 2019

Synchrony Financial reported quarterly earnings on Wednesday that easily beat analysts’ estimates, reflecting in part the impact of its acquisition of PayPal’s U.S. consumer credit portfolio.

Shares in the financial services company rose 10.3% to $29.28 after it announced fourth-quarter earnings of $1.09 per share and $4.94 billion in revenue. Thomson Reuters consensus estimates had called for earnings of $0.93 on $4.25 billion in revenue.

“Synchrony ended the year with significant momentum heading into 2019 — we generated strong results this quarter, renewed and extended a number of key relationships, added new programs, and expanded our network,” CEO Margaret Keane said in a news release.

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Synchrony’s $6.9 billion acquisition of the PayPal portfolio helped boost loan receivables by $11 billion, or 14%, while fees on loan receivables were up 13%, according to CFO Brian Doubles. He also noted that the company “continued to deliver solid organic growth.”

“Overall, we’re pleased with the growth we generated across the business as well as the risk-adjusted returns on this growth,” Doubles told analysts in an earnings call.

Keane singled out the extension of Synchrony’s retail card partnership with Walmart’s Sam’s Club in the last quarter, calling it a “very significant and exciting development.”

“By extending our strategic partnership with Sam’s Club, we will continue to provide enhanced financing options for Sam’s Club members across the retailer’s nearly 600 clubs,” she said.

Overall, Synchrony last year renewed more than 50 existing partnerships and expanded the number of health and wellness treatments that consumers can finance with Synchrony’s CareCredit cards. It also acquired Loop Commerce, a technology leader in digital and in-store gifting services.

“Our investments over the past four years are increasingly contributing to our success,” Keane told analysts.

Among Synchrony’s business segments, retail card loan receivables grew 16% in the fourth quarter, while receivable for payment solutions and CareCredit were up 9% and 7%, respectively, reflecting growth in home furnishings, luxury, dental, and veterinary.

Company-wide purchase volume increased 10% to $40 billion and deposits rose $8 billion, or 13%, to $64 billion.