SYF

Why Synchrony Financial Stock Plummeted Today

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What happened

Shares of Synchrony Financial (NYSE: SYF) 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.

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.

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

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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