Analyst Downgrades Synchrony Financial Despite Raising EPS Estimate: Here's Why

Oppenheimer analyst Dominick Gabriele downgraded the rating on Synchrony Financial SYF to Perform from Outperform, rescinding the price target.

The analyst sees the downgrade as a result of 'a short-term dislocation in the market' and expects pressured volumes despite loan growth on movement away from discretionary spending. 

Gabriele notes that they were likely being 'unfairly harsh' in 2024 SYF NCOs assumptions and now cut the estimate for the NCO rate to 6.81% vs. 7.06%. 

Meanwhile, given their revised NCO expectations, the analyst raised FY24 EPS to $4.54 from $3.61 (vs. consensus of $5.38), slightly below consensus.

The analyst factored in SYF's slightly better NIM, given two extra rate hikes in 2023.

The analyst sees Q2 consensus for provision expense as likely too high, considering SYF's intra-quarter data.

Thus, Gabriele raised expectations of 2023 EPS to $5.39 (from $5.02), above consensus. 

Price Action: SYF shares are trading lower by 2.47% at $34.79 on the last check Friday.