Investor attention in the financial sector is peaking with major banks like JP Morgan (JPM), Bank of America (BAC), gearing up to initiate the Q4 earnings season. Amidst this anticipation, consumer lending stocks like Ally Financial (ALLY) and Synchrony Financial (SYF) have emerged as bright spots, holding their ground near 52-week highs.
Ally Financial and Synchrony Financial are scheduled to report their Q4 results on January 19 and 23, respectively. As investors brace for their upcoming reports, the question looms – is it the right time to consider buying Ally or Synchrony stock for higher highs?
Recent Performance Overview
Ally Financial, a provider of financial products primarily to the auto industry, and Synchrony Financial, offering a wide range of credit products through various outlets, have shown strong stock performances over the last year. Ally’s shares have surged by 36%, outperforming the S&P 500’s 24% growth, while Synchrony’s stock has seen a commendable 17% rise. Notably, Synchrony reached a 52-week high of over $38 a share, and Ally is on the verge of reaching its highs of $35.78 a share seen last February.
Image Source: Zacks Investment Research
Q4 Previews & Outlook
Looking into their Q4 earnings estimates, Ally’s figures are projected to decrease to $0.51 per share from $1.08 per share in Q4 2022, with a predicted -9% decline in sales to $2 billion. However, Ally’s FY24 earnings are forecasted to rebound, rising by 14% to $3.57 per share as total sales are expected to recover and increase by 2% to $8.32 billion.
Synchrony’s Q4 earnings are anticipated to decline by 22% to $0.98 per share, despite an 8% year-over-year increase in sales to $4.45 billion. For FY24, Synchrony’s earnings are expected to rebound, rising by 7% to $5.51 per share, with a projected 7% growth in total sales to $18.17 billion.
Strong Value
Despite what may seem like a loss in post-pandemic momentum in terms of bottom-line figures, Ally and Synchrony stocks have surged due to their reasonable valuations. Specifically, Ally’s stock trades at a very reasonable 10.8X forward earnings multiple, and Synchrony shares trade at just 7.3X. Furthermore, Ally boasts a generous 3.5% annual dividend yield, while Synchrony offers a 2.67% yield, both notably above the S&P 500’s 1.4% average.
Takeaway
As of now, Ally Financial and Synchrony Financial’s stock both land a Zacks Rank #3 (Hold). Their potential for higher highs may heavily depend on their Q4 results, but maintaining positions in these consumer finance leaders at their current levels could continue to be rewarding for investors. It’s an anxious wait for their upcoming results, but for now, it’s a green light for taking a position or holding on to these stocks.
