Image: ShutterstockMuch attention will be on the financial sector, with JP Morgan (JPM – Free Report), Bank of America (BAC – Free Report), and other big banks set to kick-start the Q4 earnings season when they report their quarterly results next Friday.With that being said, several consumer lending stocks have been bright spots in the financial sector as well — with Ally Financial (ALLY – Free Report) and Synchrony Financial (SYF – Free Report) standing out in particular.Ally and Synchrony have recently been hovering near their 52-week highs, and will be reporting Q4 results later in the month on Jan. 19 and 23, respectively. Leading up to their reports, here is a closer look to see if now is a good time to buy Ally or Synchrony stock for higher highs.
Recent Performance Overview
As diversified financial service providers, Ally offers a broad range of financial products and services primarily to the auto industry, while Synchrony provides a wide range of credit products through a diverse group of national and regional retailers, local merchants, and manufacturers, among others.Over the last year, Ally’s stock performance has been strong, with shares up +36% to top the S&P 500’s +24%, while Synchrony’s +17% has been very respectable as well. Notably, Synchrony hit 52-week highs of over $38 a share recently, and Ally just reached the cusp of its highs of $35.78 a share seen last February.
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Q4 Previews & Outlook
Ally and Synchrony are up against tough to compete against prior year quarters in regards to their Q4 earnings picture. Fourth-quarter earnings estimates for Ally are slated at $0.51 a share compared to $1.08 per share in Q4 2022. On the top line, Q4 sales are projected to be down -9% to $2 billion.Overall, Ally’s annual earnings are expected at $3.12 per share for FY23 compared to $6.06 per share in 2022. However, FY24 earnings are forecasted to rebound and rise 14% to $3.57 per share. Total sales are now projected to dip -3% in FY23, but recover and rise 2% in FY24 to $8.32 billion.
Image Source: Zacks Investment ResearchTurning to Synchrony, Q4 earnings are expected to be down -22% to $0.98 a share versus $1.26 per share in the comparative quarter. This is despite fourth quarter sales being projected to rise 8% year-over-year to $4.45 billion.Synchrony is expected to round out FY23 with EPS down -16% to $5.13 per share, but FY24 earnings are anticipated to rebound and rise 7% to $5.51 a share. Total sales are expected to have risen 8% in FY23 and are projected to rise another 7% this year to $18.17 billion.
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Strong Value
While it may seem like Ally and Synchrony are losing their post-pandemic momentum regarding bottom line figures, reasonable valuations have been the main catalyst to the recent surge in both stocks. To that point, Ally’s stock still trades at a very reasonable 10.8X forward earnings multiple, while Synchrony shares trade at just 7.3X.
Image Source: Zacks Investment ResearchOffering more value to investors, Ally currently has a generous 3.5% annual dividend yield, while Synchrony’s 2.67% is nicely above the S&P 500’s 1.4% average as well.
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Takeaway
For now, Ally Financial and Synchrony Financial both land a Zacks Rank #3 (Hold). The possibility of higher highs may largely depend on their Q4 results, but holding positions in these consumer finance leaders may continue to pay off at their recent levels.More By This Author:Keep An Eye On 3 Permian Stocks As Oil Price Is Still Healthy4 Stocks to Watch as Bitcoin Rally Continues Into 2024Goldman Sachs Outperforms Broader Market
